Maximizing The Midmarket: 8 Cost-Saving Actions For Midsize Customers2:00 PM EST Thu. Apr. 25, 2013
One of the most daunting challenges midmarket IT executives face today is the demand by business leaders to do more with fewer people, smaller budgets and limited resources. As a result, CIOs of midsize enterprises must produce positive business outcomes through a savvy mix of partnering, Opex-based budgeting and prioritizing projects.
We asked more than 130 midmarket CIOs about their top cost-saving actions and compiled the results so solution providers can help their customers achieve their goals. Survey respondents were attendees at our recent Midsize Enterprise Summit conference, which is produced by XChange Events, a sister company to CRN.com
A large majority of the IT executives surveyed said their No. 1 cost-saving action was virtualization. The one thing to know about the midmarket is it was an early adopter of server virtualization. "Virtualization has reduced power consumption and cooling costs for our organization. It has also reduced the management burden and allowed IT staff to invest time into other initiatives," said James Ledbetter, manager of IT at Independent Stave Company.
Many IT executives noted that virtualization helped with hardware and application management as well. "Virtualization has saved us money and has made our environment less complex—we now maintain one-sixth of the hardware," said Greg Katers, director of IT at Green Bay Packaging. In agreement with Katers, John Grove, director of IT for TMI Montana, said: "Virtual desktop infrastructure (VDI) has huge cost savings on the backside when dealing with user support and the ability to handle applications on any hardware and OS."
A close second to virtualization is a review and refresh of the IT contracts and infrastructure. Sometimes, taking a step back and acquiring a fresh perspective is all it takes for an IT executive to truly understand the budget issues they are having and find a proper solution. Many of the CIO respondents said they reviewed or refreshed IT communication contracts and various operation elements to oil their IT machine and save money.
"We reviewed contracts to eliminate unused services, pushing for discounts and inventorying products to get all of the uses," said Matthew Colona, CTO of Envininet Inc. Other IT executives replaced and refreshed certain technologies, specifically printers and network infrastructure, to improve ROI. "Most IT executives' cost-saving initiatives are targeted to redirect budget-saving to new initiatives. Funding of new initiatives are accomplished through saving in other IT or business expenses," said Jose Martinez, director of information services at Pacific Maritime Association.
Consolidation is a word that is increasingly circulating around the IT community as many have recognized the value of packaging technology to save costs. Some of the areas IT executive respondents said they are consolidating are: servers, applications, cellular billing, multiple hardware platforms, ERP and CRM, data centers, telephones, personal desktop devices and, of course, the IT distributors and vendors that supply such technologies.
"Server consolidation from 50 to less than 15 physical devices has really helped us reduce costs," said Director of technology for Dalton Public Schools Howard Langford. Scott Andrews, IT manager at Ag Leader Technology, shared another consolidation success story: "Consolidation and renegotiation of telephony contracts created 50 percent savings."
Leveraging IT skill sets across the organization and developing the skills of those on the IT team can save the costs affiliated with hiring and training new staff. "We have transitioned more IT development work to internal staff and are working with management to help prioritize organizational needs to direct our focus," said Chuck Cozad, director of technology services and strategy for the National Pork Board.
Jim Schwan, director of IT for Preferred Credit, said his organization is focusing on a similar strategy to save dollars. "We have made extensive improvements in worker productivity by building more capability into our architecture. We also changed the trajectory of our headcount growth path. Our projections in 2007 were that we would have 350 to 400 people by now; we have managed to hold our headcount to around 250 while growing our volume by 30 percent," he explained.
Many IT executives said that they are cutting IT-related costs by adopting environment-friendly habits such as going paperless or saving energy. Rick Meuser, director of IT at Silgan Plastics, said that he has rearranged his firm's computer room into hot and cold zones and installed a curtain to keep the zones apart creating great savings in utility costs. On the paperless front, Eric Murphy, IT director of The Original Cakerie, said he started to implement a paperless environment on his organization's shop floor as well as for vendor invoices.
Like Murphy, other IT executives, such as Mike Schoepke, AVP of computer operations at Paddock Publications and The Daily Herald, and Richard Morgan-Fine, director of IT at Clarinda Regional Health Center, said that they deployed centralized printing and print-management solutions to reduce as much paper as possible. "Our print-management solution dropped printers, faxes, scanners and copier devices from 130 to 40, saving us tons of money," Schoepke said.
By handling internal voice calls over the data network, enterprises can reduce voice expenses by about 10 percent by just removing internal voice calls from the public switched telephone network, according to Jim Browning, vice president and research director at Gartner. "A multisite midsize business deployed a VoIP system connected to its MPLS. With free calls between sites, the least cost routing across the WAN, new rates for long distance and the elimination of more than 100 analog lines, the company has achieved a 40 percent reduction in telephone costs, which equates to about $250,000 in savings per year," he said.
Joel Wolfe, director of information services at J-W Energy Company said: "We saw a 75 percent reduction in physical phone lines utilizing SIP trunking over existing WAN. This equates to approximately 50,000 per month in telecommunication savings." Kenneth Munson, director of IT at Parr Lumber Company, noted similar successes.
Taking certain operations off-site can unload some monetary burdens usually bestowed upon IT departments. Myron Koehn, executive director of IT at Lutheran Church Missouri Synod, shared a perfect example of good use of outsourcing to cut costs: "We have rationalized all of our applications and grouped them into categories—those to be outsourced, those to be shut down and those to be retained/hosted internally. We have taken a five-year total cost of ownership approach to decision-making, outsourcing when justified based on a five-year TCO."
Many other IT executives who participated in the survey said that they are moving to co-location facilities and outsourcing things like printer maintenance and project-based needs. Director of IT for Oerlikon Balzers USA., Joaquin Hernandez said that outsourcing printer maintenance created a 25 percent cost reduction.
The bring-your-own-device (BYOD) phenomenon has taken the midmarket by storm, and has brought with it some actionable cost-saving opportunities. By allowing employees to bring their own devices to connect to a company's IT infrastructure and network, physical hardware costs are significantly reduced. It seems like a no-brainer. Penny Soat, customer service manager and former Information Management Technology and Systems Manager at Kreg Tool Company, and Jerzy Zwierzchowski, director of IT operations at Mark Anthony Group, both said that they have utilized BYOD strategies to cut IT costs and save money.
When survey respondents were asked to name their top three networking initiatives, BYOD and Mobile Device Management (MDM) landed in the top 10 most mentioned. This could mean that many midmarket IT executives are finally adopting BYOD strategies to conform to the rapidly changing technology environment. But what many of them might not realize just yet are the cost-saving possibilities that BYOD offers.