Slicing Through IT CostsBy Cary Westmark | Posted 2008-03-31 Email Print
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In the eyes of non-IT executives, information and business technology is little more than plumbing—a cost of doing business that often detracts from their primary goal of improving the bottom line. Cary Westmark lays out his personal strategies for evaluating IT priorities against the corporate bottom line.
CARY WESTMARK, vice president of technology at Troon Golf, the management company of some of the largest and best golf courses around the world, has discovered over the course of his career that hitting a hole in one with non-IT executives means presenting fiscal arguments, not technology jargon. In this essay, Westmark lays out his personal strategies for evaluating IT priorities against the corporate bottom line.
Most enterprises spend between 5 percent and 10 percent of their gross revenue on information technology products, services, staffing and support. It’s a staggering amount of money, when you think about it: For a $100 million company, the IT tab could reach $10 million.
IT pros—from system admins to CIOs—love all the gadgets, applications and code they get to play with. They love to talk about the cool factor of the latest software release or new firmware upgrade. Non-IT executives, on the other hand, couldn’t care less. They equate IT to plumbing: It’s like the pipes you buy when constructing the building; you spend money on them only when they spring a leak.
This isn’t necessarily a knock on non-IT executives. After all, they shouldn’t be expected to understand the internal workings of IT or the best ways to manage information systems. These executives focus on the overall success of the business, managing from a higher level and keeping a close eye on the bottom line.
For IT professionals to be successful, they must understand what motivates their line-of-business counterparts and learn to speak their language. Key phrases that IT pros should incorporate into their vocabulary include “cost savings,” “expense avoidance” and “improving the bottom line.” In other words, they must think about their company’s strategic business and revenue objectives first, and the coolness of their technology second.
Proving the value of IT is the most difficult side of this equation since technology becomes commoditized almost as quickly as it’s installed. Many companies do capitalize on technology to give them a strategic advantage in the marketplace, but that advantage often dissipates as their rivals adopt the same technology, rendering IT merely a cost of doing business. Hence, the plumbing analogy.
But information technology can create efficiencies and reduce operating costs, and that is where IT professionals can become heroes in the eyes of their business compatriots. The key is to present business executives with a strategic vision for IT without bogging them down with technical details. Unfortunately, that often proves more difficult than shooting an eagle on the back nine.
Based on my 20-plus years in IT management, I’ve gathered some low-hanging fruit that’s worked well for me—and should work for you too.
Let’s start with total cost of ownership (TCO) for computer hardware. Most non-IT executives view hardware as a one-time capital expense, and they fail to understand the necessity and the benefits of a strategic replacement program. The hidden costs of powering, operating and maintaining a piece of hardware often outstrips the purchase price. For example, according to some studies, the cost of powering a storage server is three times the purchase price over the life of the device.
Maintenance and operating costs increase dramatically after a device has exceeded its planned life expectancy—usually three years. By demonstrating how technology costs increase over time if an organization doesn’t retire and replace devices, IT professionals stand a better chance of gaining support for a strategic replacement program.
In the late ’90s, before Troon Golf introduced a strategic technology refresh plan, our facilities spent an average of $800 per month on support. Eight years and one hardware refresh plan later, the monthly average support is down to $300—a saving of roughly $50,000. Throw in cost savings from increased user productivity, less downtime and reduced data loss, and you’ll realize that TCO can be optimized through a planned refresh strategy.