4 Recommendations to Avoid Spending Too Much on IT

To take advantage of big cost savings in information technology, a study says businesses need to change their buying habits. Here’s how.



Despite an unprecedented trend to control information-technology costs, the majority of companies fail to achieve maximum savings, according to a multi-nation Forrester Consulting study.

“After surveying 304 IT decision-makers, Forrester found that even though IT budgets are under constant scrutiny, businesses have defaulted to vendor influence which has blinded them to the rewards of extending hardware lifecycles and third-party maintenance solutions,” according to the 2013 report.

Seventy-six percent of respondents want to minimize expenditures, but they don’t know they’re overpaying in the two ways.

Little wonder why the top IT decision-maker for many companies is not the chief information officer – the chief financial officer is. Many CIOs are too obtuse in finance.

Instead, they should become budget savvy in our tepid economy or in case the economy worsens. In essence, CIOs should learn how to get more respect in the C-suite.

The Forrester study is entitled, “Challenging The Status Quo On Maintenance Contracts And Refresh Cycles To Lower Costs.”

More key findings:

— Up to 79 percent of organizations refresh their wired networking infrastructure every one to five years guided by industry averages that originate from the vendors.

— Vendors set the end of life agenda resulting in the sometimes unnecessary and expensive replacement of IT equipment – that still carries market value and has 20 plus years mean time between failures.

— End of life equipment is prematurely retired. Eighty-five percent of respondents admitted that they would have kept their legacy networking equipment if the vendor continued to support it.

— Original equipment manufacturer maintenance services have little return on investment. More than 80 percent of organizations buy maintenance contracts from their equipment manufacturer even though they see little value in what they are purchasing and express discontent over misrepresented cost savings, new fees, and inflexible pricing models.

— Third-party maintenance options are widely unknown. Only 21 percent report that they have leveraged competitor third-party bids when negotiating service and maintenance contracts, while 80 percent claim they would leverage third-party maintenance if they found it to be more affordable than their current contract.

Report’s recommendations:

  1. Keep what’s working within an existing infrastructure to avoid premature and unnecessary upgrades.
  2. Don’t pay for software updates if there are none, or if they are available for free. Organizations should carefully scrutinize ongoing maintenance contracts in order to find valuable operational expenditure savings.
  3. Put maintenance contracts out for competitive bid, not just to different resellers, but also include third-party options.
  4. Put metrics in place to reward value, quality, and longevity, not just resiliency.

The survey’s methodology: Interviews were conducted with IT decision-makers in Australia, France, Germany, India, Japan, Singapore, the United Kingdom, and the United States.

Respondents included decision-makers in executive positions, finance, information technology, and procurement.

Hence, an obvious conclusion:

“Every CIO should make it a priority to read this report,” says Mike Sheldon, president and CEO Curvature (www.curvature.com), formerly Network Hardware Resale, which sponsored the study.

“Businesses of all sizes need to know that there can be incredible value and cost savings with a reliable third-party maintenance service provider – helping to ease worries about tightening IT budgets without sacrificing quality,” he adds.

Amen. Review your overall business situation, how vendors are selected, upgrading solutions, end of life, and maintenance.

From the Coach’s Corner, editor’s picks for related reading:

Two Studies Indicate Need for IT Pros to Get Businesslike — CEOs have long complained to me about information technology. They complain about high-priced consultants, and that IT projects are too expensive and fail to yield a return on investment. Indeed, two studies underscored the need for IT professionals to become more businesslike.

Risk Management – Picking the Best Cloud Storage Provider — Choosing the right cloud storage provider is a must for risk management. You have a vast array of options. Cost is important, of course, but so are your company’s risk-management needs – just like the federal government.

Do BYOD Headaches Outweigh Benefits? Yes — More than half — 53 percent — of surveyed global businesses admit they’re not ready to defend against attacks on their employees’ bring their own device (BYOD) devices. Nearly all say their devices might have been attacked.

“Beware of little expenses. A small leak will sink a great ship.”
-Benjamin Franklin

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Washington: A Balanced Budget Is No Longer Enough

Updated Jan. 11, 2012

A Seattle Times headline is perplexing. True, the headline –“Lawmakers open session, try to close $1B gap” – is a fairly accurate assessment of Washington state’s budget. Not to be laboriously repetitive, but the headline is worrisome. Once again the Legislature faces a budget crisis.

“The economy is the focal point of this year’s legislature as state lawmakers attempt to close a $1.5 billion shortfall in a $34 billion budget at the state capitol in Olympia,” blogged Don Brunell, president of the Association of Washington Business (AWB).

Mr. Brunell is known for his pragmatic reasoning.

“As they deliberate, they must be mindful that Washington is in the midst of an anemic economic recovery which is very fragile,” the AWB president added. “New costs to employers, especially those along Main Street, have a dampening effect on our ability to increase consumer confidence and bring people back to work.”

That’s my sense, too. But the Legislature routinely fails to prioritize first things first. The short-term priority is to balance the 2011-2013 budget. But as a priority, it’s secondary to a bigger quandary – government and budgeting reform, which are needed immediately, as well.

Instead, all budget discussions are about the short-term and relatively insignificant issues grab a disproportionate amount of attention.

Gov. Gregoire wants to focus on a new $3.6 billion transportation package, gay marriage, shorten the school year, abolish social services, release some prisoners before the sentences expire, and increase the state’s sales tax. House Speaker Frank Chopp, D-Seattle, also says same-sex marriage is a top priority.

A significant number of citizens wants to legalize marijuana. Some lawmakers want a statewide ban on plastic grocery bags.

Most of us in business agree education is a priority. But increasing taxes even for education isn’t productive as long as government/budgeting reform is ignored as a priority.

In addition to Mr. Brunell, another thoughtful pragmatist is Jason Mercier. Mr. Mercier is director of the Center for Government Reform of the Washington Policy Center.

Worth consideration is Mr. Mercier’s list of recommended reforms:

  • Enact a constitutional tax and spending limit (with two-thirds requirement to raise taxes) modeled after the original 1993 I-601 formula.
  • Remove as many of the restrictions on lawmakers’ ability to set spending priorities as possible (collective bargaining restrictions on compensation, federal mandates, assumption of auto-pilot budgeting on programs).
  • Reform competitive contracting. Allow agencies to make performance-based contracting more proactive (create a Competitive Contracting Council).
  • Provide the governor discretionary authority to cut spending.
  • Repeal unaffordable programs instead of suspending them.
  • Require at least a 5 percent reserve when adopting the next biennial budget.
  • Require updated four-year budget outlooks to be published after each state revenue forecast or budget adoption.
  • Require completed fiscal notes before bills can be acted on.
  • Phase in a defined-contribution retirement plan that gives state workers benefits that can never be taken away.

Amen. Yes, the Legislature should soberly balance the budget. However, unless the Legislature concomitantly reforms government and the budgeting process, uncertainty will never be alleviated for the state’s businesses and consumers.

From the Coach’s Corner, you might want to consider other public policy columns.

“There is an important sense in which government is distinctive from administration. One is perpetual, the other is temporary and changeable. A man may be loyal to his government and yet oppose the particular principles and methods of administration.”

-Abraham Lincoln

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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

Budget Debate: Will Legislature Read Seattle News Media Headlines?

Nov. 28, 2011

The headline on the Seattle PI Web site was startling. It read: “FACT CHECK: Has Wash. cut budget by $10.5B? Hardly.”

The headline and accompanying story questioned what appear to be misrepresentations by Gov. Chris Gregoire when she claimed Washington has slashed $10.8 billion from the state budget in the last three years. The cuts were her justification for proposing a sales tax increase to balance the budget.

My hope in the budget debate is that the Legislature will read such Seattle media headlines, as they meet in a special session this week to debate the budget deficit.

(Actually, the story appeared in the Seattle PI an hour after it first appeared in the Seattle Times. But, inexplicably, the Seattle Times deleted the story less than an hour after the PI story appeared.)

Reporter Mike Baker documented how the hundreds of so-called cuts are really spending increases that haven’t been implemented.

For example, the alleged cuts include:

  • $682 million in cost-of- living increases for education employees
  • $344 million in cost-of-living hikes for pensions
  • $1 billion in education cuts, but it hasn’t really been slashed because of student tuition increases
  • $128 million for an education apportionment payment, but the payment has actually been doled out
  • $69 million for state parks, but in reality the state took in that amount from user fees

Mr. Baker also reminded us that the state is ready to spend around $30 billion from the general fund budget. That’s more money than was spent in the more-recent budget cycle.

Because it was an Associate Press story, it soon appeared on 54 media sites.

The sales tax proposal is controversial for good reason, and why the sales tax debate erupted in Washington state.

Public officials have long violated good government standards on transparency and in spending. On multiple occasions, this column has called for reform and wondered why not transparency for good, open government in Washington state?

We need better public policy – here are a couple of examples:

  • Proposing to cut $160 million from state colleges and universities is unconscionable.
  • Special interests such as the Washington Federation of State Employees should be reasonable and agree to renegotiate labor contracts.

It’s easy to conclude from the Associated Press story that Washington state has a spending problem, not a revenue problem. For example, the State Auditor revealed state government spends $1.8 million for nearly 6,700 unused cell phones is only one example. We need more public officials to create a favorable economic environment.

Given the economy and continuous budget crises, Washington legislators should finally start compromising, stop the longtime practice of shell games and launch legitimate reform. Only then, will thoughtful businesspeople and voters trust Washington state government and consider a sales tax increase.

So, in the budget debate: Will the Legislature read the Seattle news media headlines? It’s time for good government.

From the Coach’s Corner, furthermore, the state can create more tax revenue if it encourages entrepreneurship to create jobs. Here’s What Small Business Owners Need from Washington State Policymakers.

Here’s another no-brainer: How Washington Fails in Filmmaking for Economic Development.

“Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.

-George Washington

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Columnist Terry Corbell is a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

Washington Needs Soul-Searching in Public Policy, Budgeting – and Action

 

Sept. 16, 2010

So now we have further confirmation that Washington state is long overdue in launching a prudent approach to public policy and budgeting. Officially, the state forecasts another $1.4 billion shortfall until June, 2013. That means red ink totaling at least $4.5 billion.

“The governor has already responded to this forecast by authorizing across-the-board cuts, but that simply isn’t the most thoughtful approach available,” said state Sen. Joseph Zarelli, R-Ridgefield, in a press release.

“On one hand she says she wants the next state budget to reflect the priorities of government and Washington values; on the other hand she has ordered cuts to the current budget that allow little if any consideration for priorities and values,” he added.

Sen. Zarelli also raised the salient question:

“What sense does it make to cut services for our most vulnerable citizens by the same percentage as the state’s efforts to promote tourism?”

His suggested alternative to across-the-board cuts?

“It would be better for the Legislature to convene for a short special session, because we can do things the governor can’t. We can make policy and structural changes that would focus the available revenue on the most essential services, and leave enough in reserve to get the state through June, when the biennium ends. We can also adopt reforms that would help when it’s time to write the 2009-11 budget,” wrote Sen. Zarelli.

To more than 50,000 state workers, he e-mailed this request:

“We hope you will take the time, either at work or at home, to submit your savings ideas here. Your ideas will be routed directly to us.”

How does the Office of Financial Management explain the budget shortfall?

“Revenue for the current budget period, 2009-11, is projected to decrease $770 million, resulting in total projected General Fund revenue for the biennium of $28.5 billion. Revenue for the next budget period, 2011-13, is projected to decrease $669 million, resulting in total projected General Fund revenue for that biennium of $33.4 billion.

‘With this drop in revenue, our current budget is now projected to be in the red,’ said Marty Brown, director of OFM. ‘We will enact cuts to address this problem while we look for ways to transform the budget and address shortfalls for the next budget period.’

The forecast projects an ending fund deficit for 2009-11 of $516 million, which includes $4 million in the rainy-day fund.”

Ouch, but it’s not surprising news. As a business-performance consultant, the state’s dubious policymaking and budgeting have been frequent topics here.

What is shocking has been the state’s lack of transparency in budgeting and that many elected officials — excluding State Auditor Brian Sonntag — have been late to the solution process and have not solved these predicted and lingering problems. That’s inadvisable public policy and budgeting.

“Despite still projecting revenue growth of nearly $5 billion between 2009-11 and 2011-13, a budget shortfall exceeding $4.5 billion is projected for the next budget due to a structural spending imbalance and the carry forward costs of programs in the current budget,” said Jason Mercier, the director of the Center for Government Reform at the Washington Policy Center.

“This budget crisis makes it imperative for legislative leaders to bring lawmakers back to Olympia to solve this problem in a thoughtful way,” said Mr. Mercier. “Failing to do their job until the 2011 session convenes in January would be the ultimate abdication of their legislative responsibility to balance the budget.

“If lawmakers continue to refuse to balance the budget they should at least call a short special session to change state law to allow the Governor to make discretionary and rational cuts while leaving up to a one percent reserve,” Mr. Mercier concluded.

Well said, as usual. Actually, Mr. Mercier and Sen. Zarelli have long expressed their public policy and budgetary concerns.

Since 2001, The Biz Coach column, at three Seattle media Web sites, has warned that Washington state’s economy has been too valuable and/or too-fragile to gamble with costly unknowns.

This Web site was launched July 29, 2009. You’ll find countless archived Biz Coach public policy columns with warnings and solutions including, the initial column, Analysis: Steps for Economic Success in Washington State. Not to be gauche, the column’s ideas are valid today. It’s past time to reboot – before it’s too late.

From the Coach’s Corner, for more background information and sound ideas, here are four resource links:

Secret to Success in an Uncertain Economy: Expand Marketing



Businesses are self-destructing when they cut back on marketing in downturns. If evaluated and implemented properly, marketing creates a return on investment in multiple ways.

More on that later. Meantime, suffice to say downturns or not, a good marketing approach requires intensity and is based on thought leadership about every facet from social media to internal company communications. And marketing, of course, includes strong public relations.

If anything, maintain your marketing investment and expand your PR efforts.

Sports provide great metaphors for business. As in any sport, remember this basic principle: Write a great game plan using marketing plan essentials, test your ideas and then attack…attack…attack.

An award-winning public relations expert asserts it’s unproductive to stop or trim marketing during a recession.

Devon Blaine

“Though this strategy might seem to make common sense, recessions are times that call for uncommon business wisdom,” says Ms. Devon Blaine, president and CEO of the The Blaine Group, Inc. in Beverly Hills. “Recessions reward the aggressive marketer and penalize the timid one.”

In other words, timorous businesses forego opportunities for niche leadership and to expand their market share.

Authoritative Study

Ms. Blaine cited a noteworthy study, “Advertising & Marketing During An Economic Downturn,” by David Stanley of Industrial Equipment News. It analyzed the situations of more than 1,000 manufacturers in what’s called “Profit Impact of Market Strategy” (PIMS).

Far too often, studies appear to be self-serving for special interests. But this study is objective and unique. It’s from The Strategic Planning Institute in Cambridge, MA, which describes itself as a non-profit membership association that promotes “strategic business management.”

Actually, The Strategic Planning Institute originated as an internal planning project at General Electric. Then, from 1972 to 1974, it evolved into a Harvard Business School project.

The PIMS study concluded that bold marketing in a downturn resulted in strong performance while tepid marketing had undesirable consequences. In addition, the higher marketing investments did not hurt profits for the short-term.

1990’s lessons

“Penton Research Services reports that shortly after the 1990-91 recession, Coopers & Lybrand, in conjunction with Business Science International, surveyed CEOs from growth companies about the effect the recession had on their profit growth and the actions they had taken in response,” cited Ms. Blaine.

So what were the conclusions from the second study?

“A strong marketing program enables a firm to solidify its customer base, take business away from less aggressive competitors, and position itself for future growth during the recovery,” she concluded.

Again, I agree with Ms. Blaine. Having experienced five major economic downturns in my career, I know there is one inescapable fact about marketing and recessions. Companies that view marketing strictly as an expense and not an investment miss opportunities for growth. Successful companies look at the short and long-term ramifications.

During downturns, good companies that cut marketing budgets soon learn they do not retain dominance in their marketplace, and they will learn they have lost market share once the upturn begins.

My thanks to Ms. Blaine for contributing her expertise.

(Disclosure: Ms. Blaine is a talented friend who was named the southern California publicist of year for her work in professional PR and crisis intervention. We have also been members of Consultants West, a roundtable of veteran consultants in Los Angeles.)

From the Coach’s Corner: Not to be redundant and to add to Ms. Blaine’s astute points, here are five lessons I’ve learned about marketing and recessions:

  1. A quality company that maintains stellar marketing in a recession succeeds. But it is imperative in the worst of conditions to continually evaluate the company’s marketing return on investment.
  2. If a company does not provide enough value or is a substandard company, marketing does not help them.
  3. An economic downturn is a terrific opportunity to take a big picture snapshot of a company. It is important to look a client’s total situation – such as in human resources or pricing – and come up with solutions.
  4. The best companies are proactive about planning and execution in good times and bad. Many companies show poor judgment about pricing and cost-cutting in marketing. Automatically slashing prices without assessing the competitive landscape can undermine your brand’s value, and make it difficult to successfully raise prices later.
  5. Companies that cut marketing investments fail to sustain their “Top-of-the Mind Awareness” and unnecessarily lose revenue in the recessions, and they endanger their profitability when economic conditions improve. Indeed, it takes more resources – time, energy and money – because they have to work too hard just to re-establish their brand.

Here are related resource links:

“Unless we change direction, we are likely to end up where we are headed.”

– Chinese proverb


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.






Seattle business consultant Terry Corbell provides high-performance management services and strategies.