Carryng On: Where Do Your IT Dollars Go?

This doesn't bode well as we approach budgeting season. Although there may be a little bit of belt loosening going on in 2004, there'll still be plenty of pressure to contain or cut IT costs. And that, ironically, may mean investing more in the network to improve overall IT service delivery.

Back to Square One

The only way to get the funds you need is to cut existing costs. And that's do-able, providing you think things through. You might be able to centralize network administration, or institute network controls and cost-allocation tools to ensure that resources are used correctly. Perhaps you could adopt a unified network-access model, converging your data, voice and video networks, to compensate for rising WAN access fees, or drop to lower service levels by using public Internet services where private networks are overkill.

And yes, voice and data convergence is making headway--two-thirds of U.S. enterprises plan to implement VoIP in the next three years, with deployments picking up slightly in 2004 as ROI improves, according to a recent Meta Group study. In fact, 45 percent of Global 2000 companies expect an ROI for VoIP less than 18 months after deployment. Still, many companies are playing wait-and-see: Only 36 percent plan to deploy before 2005.

But before you implement any cost-cutting measures, take a good, hard look at how you spend your money. It may be tough, but force yourself to think, rethink and think again. This process, however painful, can lead you to some surprising conclusions, and can change your containment strategy drastically.Here's an example: Carrier service fees account for about 75 percent of frame relay network costs, support fees account for 61 percent of VPN costs, and hardware and maintenance fees account for 83 percent of PBX system costs, according to Meta. If your network expenses follow this pattern, your cost-cutting priorities for 2004 should include negotiating lower frame relay and voice carrier rates, centralizing VPN support and minimizing hardware expenses on any PBX upgrades you have planned.

Of course, it can take some detective work to get a true picture of all your costs. More than 20 percent of remote dial-up access costs stem from hotel charges for outside lines, according to Meta. A major hotel in San Diego charges $13 for a three-hour local call, for example. But IT doesn't always get to see these surcharges--they go straight to accounting by way of employees' expense forms. If that's the case in your organization, why not set a policy that lets employees use hotel broadband services or cellular data services where available? (These services can be less costly and more convenient, too.)

Remember, too, sometimes you have to spend money to save money. If you're still running equipment that was purchased during the first Bush administration, maintenance and support costs may be soaring even as service is declining because most vendors are focused on selling and supporting new gear, not relics. Consider retiring your campus ATM, token ring and CDPD hardware and investing in something more state of the art.

The projects that will get green-lighted for 2004 are those you can justify with concrete costs and ROI figures, not with squishy claims about "increased productivity," "better customer service" and "building for the future."

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