Measure Twice, Cut Once – IT Cost Optimization with Asset Management-09-09-09

8/8/2019 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





10/24

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


Joint Business and IT Cost Savings



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

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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





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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?

Measure Twice, Cut Once – IT Cost Optimization with Asset Management-09-09-09

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