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One of the best ways to keep Information Technology (IT) costs to a minimum is through a systematic undertaking known as Lifecycle Management. A successful implementation will make it easy for IT, finance and the user community to know many vital pieces of information and be able to act upon them. The knowledge that becomes known is:
- What the company owns or leases (hardware, software and services)
- What the company uses and where it is, and
- Is the company getting what the vendor has promised (bang for the buck).
The main key to success is sound process. This cannot be stressed enough, hard work in the planning and implementation stages will reap huge benefits once your lifecycle program goes into production. The more operational groups within the company that you can include in your planning stage, without giving them say over the ultimate solution, the more useful your lifecycle program will be. An example of this is including the finance group in the planning process. With the participation of the finance group, the lifecycle management system can ultimately feed the company budgeting system, making the budget process more efficient.
Stage 1: Contract Management; What does the company own and lease?
It may surprise you that many companies cannot answer the simple question: What IT assets (hardware, software and services) do you own and lease? By being able to answer this question, costs (potentially millions of dollars depending on the size of your organization) can be saved and reallocated to other corporate initiatives. This is achievable through weeding out expired leases, eliminating hardware maintenance that is no longer applicable and the write-off of corporate software and hardware assets that are no longer in use.
The easiest way to start getting this information is to look at the previous year’s payments – accounts payable. This will let the person or group managing this process to see what vendors the company is doing business with. This action should be followed up by an inventory of that file cabinet full of contacts that no one ever opens. Once inventoried, each vendor should be contacted to make sure all agreements in place are known and copies are on file with the contract management project. This allows the second phase of contact management to happen, building a usable database.
Ideally, the database being built will eventually be used to inform IT managers that the equipment they use is coming to the end of useful life whether owned or leased. Secondly, on the software side, managers will be informed when annual maintenance is due, how many licenses are owned, and by tying the asset management system, talked about later in this article, how many licenses are being used. By getting this information early, managers in all areas of operations can make informed decisions and have time to act upon them; ultimately saving money by lessening the frequency of late payments and owning what you are using and planning to use in the near future.
Stage 2: Asset Management; What does the company use and where is it?
Knowing what your company uses and where it is located is as important as knowing what you own. By knowing these facts, groups both within and outside of IT can more effectively budget, plan and allocate resources. Examples of this include: 1) The data center facilities group can more accurately plan for power expenditures, floor space usage and eventual expansions of the data center environment, if they know what equipment is being used and where it is located; 2) The disaster recovery group can plan their activities more effectively when they know exactly what equipment is being used and what software and applications are running on it; and lastly 3) By knowing what is running on servers and the percentage of usage, etc. Equipment can run at a higher usage level and put the purchase or lease of new equipment further into the future.
For larger enterprises, it may be cost effective to hire a company to do a complete physical inventory of its IT assets. The results of this physical inventory can be analyzed against the information acquired in the contract management activity and then analyzed against the company’s IT department’s system wide device finding software (i.e. Microsoft, HP Open system, and various other vendors). The asset management team can then work to figure out the differences between the three systems, which should not be more than 15% of the total assets.
On the software side, there are many agent and agent-less products that can be put onto the company’s network to discover what is running on each piece of equipment the software can see. With the data that is provided, analysis can take place between what is owned and what is being used. You may find that through many projects over the years you now own, say, 15,000 licenses of a certain software, even though you only have 10,000 employees. Action can be taken to cancel the annual maintenance on unused licenses and write-off the non-depreciated capital expenditure associated with the purchase of the software. You may also find that you are under-licensed on certain software applications, so be prepared to have some expenditure offset the overall savings that will occur.
Stage 3: Vendor Management; Are vendor promises being kept?
This portion of lifecycle management is the most subjective. Measuring if a vendor is truly providing what they say they are is complicated. Metrics and Key Performance Indicators (KPIs) need to be developed for each obligation each vendor has signed up for.
Example: If a PC vendor makes the claim that your company will get 20% longer life from their product, as opposed to its competitor’s product, metrics and KPIs need to be developed so that the results can be reported on either monthly or quarterly.
Hopefully your analytics came to the conclusion that your vendor is living up to the agreement it signed, which is usually the case. If the vendor is not living up to it obligations, there could be many reasons. These reasons include: 1) scope of work was not completely known at time of signing, meaning that failure to live up to its obligations are partially the fault of the customer, and just as likely 2) the vendor made claims it could not live up to, just to get business .
There are many ways to report vendor management information. I have found that the most effective way is a simple dashboard, a quartered one-page report that shows all pertinent financial, contractual, usage and service information. Once approved by corporate powers, a scheduled meeting takes place and the findings are presented to the vendor. If vendor is living up to contractual agreements, future strategy or other topics may be discussed. If the vendor is not providing its obligations, a discussion of why will definitely occur, followed by ways in which improvement can be made. This is not necessarily a bad conversation, new understanding of the relationship will definitely take place and the corporate relationship will become stronger though the process, as long as positive results ensue.
Conclusion:
The steps listed above need to be tied together, resulting in an interface which brings all the information to a usable form. This is crucial. Once this happens, the magic starts: managers are able to make informed decisions, leased equipment is returned on time (instead of having its monthly payment made for years on end) and overall, IT costs are minimized. The company only pays for what it is using and at the end of the day, controlling costs while providing needed services, is the name of the game.
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