Where Art Thou, Cost Savings?

CIOs, by definition, are looking, constantly, for ways of cutting costs. Infrastructure, research and development and, of course, head count, each comes under scrutiny. CIOs Focus On Cost Control" offers insight into what these C-level executives are looking at when they are looking to trim the fat.

One of the areas under the microscope, obviously, is hardware: Does my company need new hardware? Can the existing infrastructure be upgraded or repaired? Do I need additional equipment?

In fact, according to research from the Towers Group, roughly 67 percent of IT budgets were dedicated in the 1990s to maintenance, while 11 percent went to replacement technology and 22 percent to new IT spending. Today, maintenance spending is on the downswing, with 61 percent of spending going toward maintenance projects, and new IT spending has increased to 27 percent. (Spending on replacement technology has remained virtually steady at 12 percent.) The research suggests that by the end of the decade, maintenance spending will fall to 55 percent of the overall purse; while replacement technology will account for some 15 percent; and new technology will climb to 30 percent.

How are companies going to achieve those cuts in their maintenance spending? One way is through server consolidation. Server consolidation is not solely about hardware, but also includes software, services and systems management disciplines. The goal is to create a new system that is greater than the sum of its parts. Consolidating servers is especially wise for companies that have just gone through an acquisition or merger. Often, such firms can reduce duplication and other wasteful practices by consolidating server equipment. But such an undertaking should also include server virtualization, a software technology that allows multiple operating systems to run on the same processor at the same time. (For news on Microsoft's work in this area, check out: "Microsoft Has New Take On Virtualization," )

A number of enterprises have already embarked on the consolidation/virtualization path, including JetBlue, T. Rowe Price, Nasdaq, and Monster. So you'll be in good company if your company decides to go this route. If your company already has, or is on the road, let me know what challenges you've endured.