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.

 

June 5, 2013

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. Then, companies would find it easier to control costs.

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 of Network Hardware Resale (www.networkhardware.com), 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.

Click to download the report.

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

• Two Studies Indicate Need for IT Pros to Get Businesslike
• Risk Management – Picking the Best Cloud Storage Provider
• Do BYOD Headaches Outweigh Benefits? Yes

“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?

How Economic, Political Freedom Got Boost from Two Reproaches

 

Updated – Feb. 1, 2012

The healthcare debacle is going to the U.S. Supreme Court, in part, thanks to ruling by an Atlanta federal appeals court and the Standard and Poor’s downgrade of the U.S. credit rating last August. In reality, they were positive developments. The two evens represent reproaches to the federal government’s behavior and performance.

While sustaining the bulk of the so-called reforms, thankfully, the 11th Circuit Court of Appeals ruled that Congress unconstitutionally required Americans to buy health insurance or pay a stiff fine. Most businesspeople feel differently about the law (How Healthcare Law Would Affect Small Business, and Healthcare Reform Increases Costs to Workers, Study).

Despite disingenuous claims by the Obama Administration, S&P’s downgrade was justified. In pandering to political cronies nearly all in Congress from both parties, has spent an obscene amount of money on unwarranted hometown pork and earmarks. Politicians must now stare at a huge red flag.

Another reason why the court’s health-law ruling is encouraging:

One of the opinions was written by Judge Frank M. Hull. He was appointed by a Democrat – President Bill Clinton in 1994. He was joined by Chief Judge Joel F. Dubina, who was appointed by Republican President H.W. Bush.

Until Judge Hull’s decision, lower court rulings were rendered along party lines. Republican appointees invalidated the health-law, and judicial appointees by Democrats upheld it.

“This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them re-purchase that insurance product every month for their entire lives,” wrote Judges Hull and Dubina.

“We have not found any generally applicable, judicially enforceable limiting principle that would permit us to uphold the mandate without obliterating the boundaries inherent in the system of enumerated congressional powers,” they also wrote.

Yes, there more legal challenges in the courts, including Virginia and the District of Columbia.

But this ruling was the most salient. The opponents’ case was pursued by attorneys general and governors from more than half of the states – 26. Other plaintiffs included the National Federation of Independent Business and two individuals.

Again, the U.S. Supreme Court will rule on the case.

Possible Ramifications

The Atlanta court’s dramatic ruling might influence the pricing of insurance policies. The Obamacare requirement guaranteed funding via the consistency in the mega pool of policyholders. Now, insurance companies started to hike premiums — just as predicted here at The Biz Coach.

Politically, there’s also a different landscape. Perhaps the Supreme Court might agree with the Atlanta court. But any legislative attempts by Congress to sidestep such a ruling would be unwise. That’s because the Democrats no longer enjoy being the majority in both houses of Congress. Republicans are unified against the law.

States governments are carrying out the law’s reforms. There has been a lot of angst about the costs in implementing the law. Many of the states’ politicians complain their rights have been trampled.

Even though the remaining portions of Obamacare were untouched by the Atlanta court, the ruling also appears to torch them. Why? The mandate to buy insurance is a source of the law’s funding, which has now been disrupted.

Only one source remains as a funding source – a decrease in Medicare benefits. Democrats have been disingenuous. They conveniently omit the devastation to recipients of Medicare.

Let’s hope the entire baggage in Obamacare is at-risk. It was clearly unconscionable for Congress to require Americans to buy private products.

The Great Recession may have technically ended but not for most businesspeople and consumers. That’s why the S&P downgrade and court ruling are beneficial. The reproaches help to end the expansion of the over-extended Federal government.

The reproaches also hold the promise of enhancing the economy by alleviating economic uncertainty for 14 million unemployed Americans and employers. Companies have been reluctant to hire, in part, because of the expense of Obamacare.

Here’s a better strategic plan: Balance the budget without increasing taxes on everyone. Make it feasible for startups and other businesses to hire and expand.

Economic and political freedom are two of America’s sacred liberties.

From the Coach’s Corner, here are related public policy columns:

Only Fiscal Sobriety Will Prevent Further Fiscal Chaos

Do We Really Honor the Declaration of Independence?

Manufacturing Jobs Might Return to U.S. as China’s Labor Costs Rise

Economic Climate for Small Business – Has Obama Misread the 3 Ms?

Government Spending Causes Companies to Cut Back, Harvard Study

“Giving money and power to government is like giving whiskey and car keys to teenage boys.”

-P.J. O’Rourke

 

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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?

Only Fiscal Sobriety Will Prevent Further Fiscal Chaos

 

Updated Feb. 1, 2012

We’re way past the deadline to demonstrate financial leadership. It’s time for economic fundamentals and teamwork focused on economic patriotism.

As the world’s largest-economy, threats for a double-dip recession will only worsen unless the Unites States stops the fiscal dysfunction. In fact, not only is the U.S. economy is danger, so are world markets.

With a $1.6 trillion dollar deficit, investors and average Americans aren’t confident that the Obama Administration and Congress are competent enough in public policy. Voters are sick and tired about the bickering and finger-pointing.

Fourteen million Americans are out of work. The catalysts are the economy, advances in technology and business greed for outsourcing.

Despite what the Obama Administration claims, the S&P downgrade of the U.S. credit rating was justified. If a family or a company’s credit situation is lousy and cash flow is poor, they don’t qualify for loans, period.

All of that stimulus spending hasn’t turbo-charged the economy.

The challenges are many:

• Capital isn’t circulating.
• Consumers have cut spending.
• Businesses aren’t hiring.
• Money isn’t being lent.
• Despite efforts by the Small Business Administration to promote loans, the majority of small companies don’t have the collateral, credit and cash flow to qualify for a loan.
• Don’t forget the obnoxious greed on Wall Street, which helped cause the meltdown.
• Precious little is being manufactured.
• Many investors have more confidence in gold.
• The trade deficit is exacerbated by manipulation of currencies by China, India and Japan.

The selections for the bipartisan debt panel raise more questions. It appears we’re headed for more deadlock. The panel is filled with staunch partisans from both sides – the same politicians who have long failed to recognize problems and deliver results.

The blame game has become onerous, and few politicians – from the White House to Congress – have offered constructive ideas. What we need is balance and compromise. Move to the middle, please.

To Democrats: Cut spending.

To Republicans: Quit attacking Social Security and Medicare as entitlements instead of lifelines, and reconsider the Bush tax cuts for the wealthy. (Note to Republicans, Democrats aren’t the only culpable spenders. Lest I forget, Mr. Bush waited six years before vetoing any pork bills in a GOP-dominated Congress.)

To both parties: Stop the hometown pork to get re-elected, shun unnecessary risk, and simplify the tax code. Consider all options, including the call by Steve Forbes for a 10 percent flat tax.

To the White House: Wake up to realities. Hire bipartisan economists.

Remember why this nation was founded. At-risk are all of our political and economic liberties.

Now, can we get sober fiscally and agree to roll up our sleeves?

From the Coach’s Corner, here are additional resource links on public policy:

Manufacturing Jobs Might Return to U.S. as China’s Labor Costs Rise

Job Creation: Will Public Officials Listen to Intel’s CEO?

“This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer.”

-Will Rogers

 

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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?

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:

• The state’s revenue forecast
• State Auditor Brian Sonntag’s performance audit work plan
• www.washingtonpolicy.org
• www.washingtonpolicy.org/blog