Reduce your IT Costs – Part VI

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IT management has to make cost cutting decisions and today we are going to make a large decision that has a long term impact to your support model. Yesterday we fired the delivery man, and today we are firing the delivery truck. That’s right, we are going to cancel all of our orders for new desktops and laptops for the next 3 months and possibly hold until Q2 2009.

How can we not order new laptops and desktops?

This can be easy or difficult depending on your business environment. Let’s go down these cases and see where your organization fits.

Sales force gets a new laptop every 2 year

You give everyone in your sales force a new laptop every 2 years, so you know that every month you have to order 1/24 of your sales force in new devices. Just not now for the remainder of 2008. In fact, we are going to immediately push this out to every 3 years. Laptops take a beating more than desktops and of course new employees want a new laptop. And you have been using laptop refresh cycles as a way to roll out new software. All really great ideas. But in tough times, we need to cutback. And laptops is one of those ways.

Any new mobile warriors do not get new laptops issued to them as of today – they get a reissue from the laptop supply cabinets. Let them get a new one in 3 or 6 months after they have proven themselves. Of course expect management to still give the new gear to key new hires as a perk. Be flexible and allow for these perks as necessary.

Now we were going to issue new laptops every 2 years. That is costly to IT. But wait, you have a cost transfer model that sends the costs for these new laptops to the individual business units. In this case IT is a project cost center with a net net zero budget – all costs are transferred to the business cost center charge codes. Great. Offer to make this cost savings for the better of the company. If the business still wants to do it, that is their call. You are on record trying to defer these for at a minimum 3 months.

Information Workers / Office staff gets a new desktop every 3 years

Stop now and defer all of these to 4 years. This is such low hanging fruit for cost savings how much more do we need to spend on this?

Information Workers / Office staff gets a new desktop every 4 years

Here is where we have to be careful. These machines are getting older and are experiencing a higher Mean Time Between Failure (MTBF) rate for the desktop support team. We are going to stretch this out 3months to a possible 6 months. But we need to get some feedback from the desktop support teams and the service center on MTBF issues. While making this delay can save us capital today, it may eat up operating costs and worse staff time on more frequent failures of parts from hard drives to fans.

How long do we defer this hardware replacement?

That depends, but at a minimum, look to the above suggestions, your reasons for issuing new devices, and how well they have been holding up in your organization.

But we were going to use the refresh cycle to roll out a new OS and new software. We are rolling out a new image of Microsoft Windows XP SP3 or Windows Vista, Office 2007 and Internet Explorer 7. Plus a host of other business software and applications. That’s a good point to bring up. Your refresh cycle also determines your upgrade cycles. Can you defer the start of your software rollout by 3 months till 2009? Is there a business driver for you to be rolling out at this time? Can I defer some people from Team A but not Department B and shuffle my numbers in any way?

My machines are leased, they have to go back

That is an interesting situation to be in – first all of the hardware vendors have to sell you new devices, and the finance agents might not be able to renegotiate terms at this time. Let’s ask and see what we can do. What do we ask? What would it cost for us to extend all of our leases by an additional 6 months or 12 months? What would it cost to just extend the leases on all devices expiring in the next 3 months by 3 months or longer?

Okay, that’s great, I can see where I can defer a number of machines, but how much will this safe me?

Hard dollar savings by deferring desktop and laptop replacements

1. The cost of the new devices – the big ticket item. If you have a fleet of 24,000 devices you replace every 2 years, and you defer this by 3 months, you will be able to save a lot of capital.

As an example, you are replacing all machines with Lenovo ThinkPad T61 machines with a cost of $1,671.00 each. Your hard dollar savings for 2008 will be $5,013,000.00

That alone is enough to have me come on site and provide cost savings consulting to your enterprise.

But you are not saving the money, I will have to spend it in 2009. Yes you will, but since we have made a onetime shift in our fleet life cycles, this is a onetime permanent savings. If you decide to just place a bulk order for all of those devices on January 3rd, 2009, we save the carrying costs. How much is the carrying costs on $5 Million dollars for 3 months in your organization? Even at a simple 12% annual internal interest rate, that is $150,000 in hard dollar savings, and the love of the CFO for returning over $5 million back to the cash portfolio.

2. The labor costs of deploying these devices. This depends on your environment, how you do the work, who does it, and how much you are paying. If you have a really well negotiated price of $60 per device, in our above example you would be saving $180,000. You don’t use contractors, you use internal staff. Now you can put them onto other projects and support activities, reduce overtime costs over the holiday season, and encourage the staff to burn up all of their vacation and comp time they have built up over the year.

These numbers will vary based upon the size of your organization, the devices you purchase, your replacement cycles, and how you finance the capital purchases. But if you could make a few phone calls, check the numbers, and save your organization $330,000 at work today, would you and your management call it a good day?

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