Measure Twice, Cut Once – IT Cost Optimization with Asset Management-09-09-09
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Transcript of Measure Twice, Cut Once – IT Cost Optimization with Asset Management-09-09-09
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Measure Twice, Cut Once:
Optimize IT Asset Costs
Stewart Buchanan
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Spending is not Cost
Budgeted
Spending
Costs (TCO)
some unbudgeted
Costs sink businesses,
not capital expenditurebut cash flow
Findings From Inquiries: IT Spending Cuts Don't Always Reduce Cost
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Key Issues
1. Where do IT Finance, Asset Management andProcurement intersect?
2. How does IT Asset Management help and howcan I make it cash positive?
3. Why cant I freeze spending to cut cost and whycant I plan to spend nothing?
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The Disconnect Between IT and Customers:
Business users believethat IT is like a:
IT Believes:
ERP
Cloud
E-Com
Web2.0
SaaS
Money
IT is becoming a business in its own right
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Are you flying without instruments?
Budgets are spending plansnot costs
Costs are long term ITservice or vendor contract
commitments
Can you level-out IT spending?
Historical trends
Cost Optimization: Classify Costs to Achieve Sustainable Savings
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What do IT Staff Think of Financial AssetManagement and Procurement?
I dont like it.
You can't make me do it.
I will obfuscate using thelanguage of bits and bytes.
Technology selectionis a technology issue:
- Procurement place orders
- Finance pay for them
IT's FinancialReport Card
The world is changing
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Welcome to the Virtual ITAM Team
DefineStrategies
ManageVendors
Deploy orChange
PlanBudgets
Gather
OperationalData
DesignArchitectures
Everyone in IT is responsible forthe assets you acquire and operate
DevelopMetrics
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The IT Asset Manager Role
Manages FinancialCompliance of IT
Accountable for financialplanning, analysis andmeasurement of the ITorganization
Differentiators
Budgeting and capital planning
Cost analysis
Financial modelingOne version of the truth!
Differentiators
Budgeting and capital planning
Cost analysis
Financial modelingOne version of the truth!
Communicates With:
CIO and Senior IT management
CFO and Finance IT Product Managers
Communicates With:
CIO and Senior IT management
CFO and Finance IT Product Managers
Responsibilities
Manages the life cycle of assets
Recommends an action plan forasset efficiency and effectiveness
Measures financial compliancewith budgetary targets
Develops service pricing orchargeback models(value-based, cost-plus)
Financial modeling and
technology what-if analyses
Responsibilities
Manages the life cycle of assets
Recommends an action plan forasset efficiency and effectiveness
Measures financial compliancewith budgetary targets
Develops service pricing orchargeback models(value-based, cost-plus)
Financial modeling and
technology what-if analyses
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Key Issues
1. Where do IT Finance, Asset Management andProcurement intersect?
2. How does IT Asset Management help and howcan I make it cash positive?
3. Why cant I freeze spending to cut cost and whycant I plan to spend nothing?
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Four Levels Of Cost Optimization
IT Procurement
Get the best pricing and terms for your IT purchasesGet the best pricing and terms for your IT purchases
IT Procurement
Get the best pricing and terms for your IT purchasesGet the best pricing and terms for your IT purchases
Cost Savings within IT
Identify opportunities to reduce IT costsIdentify opportunities to reduce IT costs
Cost Savings within IT
Identify opportunities to reduce IT costsIdentify opportunities to reduce IT costs
Joint Business and IT Cost Savings
Implement cost-saving technologies in conjunction with thebusiness
Implement cost-saving technologies in conjunction with thebusiness
Joint Business and IT Cost Savings
Implement cost-saving technologies in conjunction with thebusiness
Implement cost-saving technologies in conjunction with thebusiness
Enable Innovation & Business RestructuringImplement process improvement, business restructuring and
innovation
Implement process improvement, business restructuring andinnovation
Enable Innovation & Business RestructuringImplement process improvement, business restructuring and
innovation
Implement process improvement, business restructuring andinnovation
Difficulty
Difficulty
Value
Value
Execution of various types of cost optimization will involve differentparts of the organization and varying levels of control by IT alone.
1. Plan Life Cycles, Schedule Payments
2. Manage Supply Costs, Contracts, Vendors
3. Manage Demand4. Restructure the Cost Base
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1. Reschedule Payments, Extend Lifecycles
Review All Assets by Vendor and by Category:
Increase competition wherever possible
Tier support no one size fits all
Maximize remote support
Minimize on-site and end-user support Use hot spares and on-site parts to cut cost
Don't overpay for skill sets or utilization rates
Re-assess technology refresh policies
Application Software: Maintenance and Support Guidelines
Questions Manufacturers Should Ask to Address Increasing
Software Maintenance Costs
Toolkit: Checking Oracle Invoices for Maintenance and Support
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2. Manage the Cost of Supply
The Gartner Maturity Model For IT Procurement
543210
Procurement
Process
People andOrganization
Level
Project portfolio
management
IT asset
portfolio
IT asset
management
Category
management
Corporate
standards
Annual
budgetary
Sourcing teamor office
Stakeholdervirtual team
Multiskilledteam
Procurementoffice
Authorizedindividuals
Individuals buyto meet need
OptimizingManagedDefinedDevelopingInitialNonexistent
TechnologySelection
Procurement
Metrics
FinancialControls
Businessperformance
Serviceperformance
Contractualperformance
Approvedsources
Approvedproducts
Any technology,any supplier
Business
return
Process
efficiency
Service
improvement
Cost
reduction
Basic cost-
tracking
Nothing
consistent
Spendmanagement
Demandmanagement
Requirementsmanagement
Projectbusiness plan
Businesscase
Managementinitiative
543210
Procurement
Process
People andOrganization
Level
Project portfolio
management
IT asset
portfolio
IT asset
management
Category
management
Corporate
standards
Annual
budgetary
Sourcing teamor office
Stakeholdervirtual team
Multiskilledteam
Procurementoffice
Authorizedindividuals
Individuals buyto meet need
OptimizingManagedDefinedDevelopingInitialNonexistent
TechnologySelection
Procurement
Metrics
FinancialControls
Businessperformance
Serviceperformance
Contractualperformance
Approvedsources
Approvedproducts
Any technology,any supplier
Business
return
Process
efficiency
Service
improvement
Cost
reduction
Basic cost-
tracking
Nothing
consistent
Spendmanagement
Demandmanagement
Requirementsmanagement
Projectbusiness plan
Businesscase
Managementinitiative
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Analyze Supply Chain Costs
Manage Value for Money
SystemsIntegrator
EnterpriseIT Services
EnterpriseUsers
TechnologyProvider
ServiceProvider
Plan Longer For Shorter Software Contract Negotiations
IT Procurement Best Practice: Optimize YourSupply Chain as Part of Vendor Consolidation
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3. Manage Demand
Reduce consumption-driven spending
Forecast and plan demand
Pass on costs transparently Renegotiate Service Levels to lower costs
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4. Restructure Costs
Make the Most of Existing Assets
Reduce
- Stop Maintaining Unused Items
- Reduce Power Consumption
Reuse
- Licenses Software Asset Management Program
- Hardware Repurpose Underutilized Assets
Replace
- Modernize IT to make it more Cost Efficient
Recycle
- Watch out for Disposal Costs
Bought
Used
Q&A: When and How to Dispose of IT Assets Before They Become Liabilities
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Will Virtualization Save Money?
Compare the cost of virtual with non-virtual
Toolkit: How to Calculate TCO for Server Virtualization
- Server and Storage Acquisition Costs
- Software Licenses, Support and Maintenance
- Datacenter Space and Power- Administration Labor Savings
Costs
Saving
s
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Key Issues
1. Where do IT Finance, Asset Management andProcurement intersect?
2. How does IT Asset Management help and howcan I make it cash positive?
3. Why cant I freeze spending to cut cost and whycant I plan to spend nothing?
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Perpetual Licenses have Limited Lifecycles
3. Operate
4. RenewUpdate
5. Migrate
2. Integrate
1. Select
A defined depreciation period
Or Until:
Support Ends
- Or becomes too expensive
Technically obsolete:- Virtualization
- Cloud / Grid Commercially obsolete
- Acquisition/Divestment
- Outsourcing
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Fixed or Discretionary Costs?
It costs money to keep the lights on,But can you switch them off?
Toolkit Sample Template - Manage the Software Investment Life Cycle
Service Level Commitments
- expectations to deliver
Asset Commitments
- Depreciation
- Maintenance
- Disposal
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Every Server Refresh Can Cost You More
00.5
1
1.5
22.5
3
3.5
44.5
5
2005
Q2
2005
Q3
2005
Q4
2006
Q1
2006
Q2
2006
Q3
2006
Q4
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
Quarter
Revenue Multiplier
Impact of Different Licensing Models
Per Core
Per CPU
Per Server
0%
20%
40%
60%
80%
100%
120%
2005
Q2
2005
Q3
2005
Q4
2006
Q1
2006
Q2
2006
Q3
2006
Q4
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
Quarter
% Shipped2 CPU
4 Cores2 Cores
1 Core
1CPU
2Core1Core
Source: Gartner (July 2008)
Optimize Your Software License for Multi-core x86 Systems
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Software License Non-compliance
Guilty, unless you prove yourself innocent!
ISO 19770-1 is a standard.
- Do you understand the rules?
- User licenses can benon-human devices
Vendor audits arenow commonplace
- Can you afford to prove
your innocence?
Avoid expensive mistakes!
Toolkit Best Practices: Preparing for a Software Compliance Audit
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Manage Software Assets and Contracts
Access Controls
Terms and Conditions
Proofs of Purchase
Orders and Allocations
IT Strategy
Inventory
AssetReport
KnownPosition
DataQuality
Inputs Repositories Outputs
First 100 Days as a Software Asset Manager
Assign Software Licenses to Cut Unbudgeted Costs:SAM Best Practice
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Software Cost Optimization through SAM
Software Cost Optimization Maturity Model
Level 0
Nonexistent
1
Initial
2
Developing
3
Defined
4
Managed
5
Optimizing
PeopleDiffused
responsibilitySAM
managerCategorymanagers
Projectmanagers Stakeholders
Budgetholders
PolicyOnly goodintentions
Procurementonly
Useraccountability
Budget-holderaccountability
Businessaccountability
Vendoraccountability
Process NoneProject
procurementContract
managementEntitlementsmanagement
Vendormanagement
Strategicvendor mgmt.
TechnologyNothing
consistentBasic
discoveryIT asset
repositoriesLicensingrule base
Automatedallocation
Portfolioanalysis
FinanceProjectbudget
Licenses,maintenance
Versionlife cycles
Productlife cycles
Total cost ofownership
Support IPmanagement
Metrics Onlyspending
% productcoverage
% termscomplied with
% life cyclesplanned
% costsbudgeted
% licensesdriving value
Risk Managed NoneUnfocusedspending
Licensenoncompliance
Unmanagedlife cycles
Unbudgetedcosts
Misalignedspending
Source: Gartner (January 2009
Optimize Software Licensing Costs With Software Asset Management
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Next Steps
Review the accuracy and completenessof your spending and asset records
- You know how much you spend but what on and why?
Identify and manage unbudgeted costs and risks- How much contingency can you afford?
Start planning lifecycles and lifecycle TCO
- Are costs sustainable or do they need restructuring?