Lightening the load

Reduce total cost of ownership with strategic sourcing and cost-optimized network design.

As IT executives finalize their 2003 budgets, few expect much growth. The new spending goals in these times of austerity are to reduce the total cost of ownership and demonstrate a return on investment.

Fixing cost inefficiencies in your infrastructure is nowhere near as much fun as issuing a request for proposal (RFP) for hot new technology, but the process is the one that produces the quick results that are required by today's businesses.

Before you can determine how to reduce costs, you need to have a solid handle on what you're paying. Identify your network costs, including hardware, software, services and labor. Then review the data to target opportunities for savings.

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As IT executives finalize their 2003 budgets, few expect much growth. The new spending goals in these times of austerity are to reduce the total cost of ownership and demonstrate a return on investment.

Fixing cost inefficiencies in your infrastructure is nowhere near as much fun as issuing a request for proposal (RFP) for hot new technology, but the process is the one that produces the quick results that are required by today's businesses.

Before you can determine how to reduce costs, you need to have a solid handle on what you're paying. Identify your network costs, including hardware, software, services and labor. Then review the data to target opportunities for savings.

The next step is to realize these savings. There are two approaches to reducing costs: Paying less for the same service by strategic sourcing, and buying fewer services as a result of a cost-optimized network design.

Strategic sourcing

A comprehensive, strategic-sourcing effort can reduce costs by an average of 20%. Midsize organizations that spend $20 million per year on voice, data and wireless services can save millions of dollars in a short time. For larger companies, the savings can be even more substantial.

Your best bet is to enlist the help of professionals that have extensive experience in competitive procurement, such as an internal procurement group or outside consulting firm. The goal is to buy products and services at better-than-market rates while guaranteeing required levels of service. Here are the steps to follow:

1) Send a comprehensive RFP for each service, delineating your technical, business and legal requirements.

• Review current network design.
• Identify RFP requirements.
• Determine RFP recipients.
• Establish your evaluation criteria and weighting scheme.
• Write your RFP and send to vendors.

2) Conduct an analysis on costs and services to determine which vendors can meet your needs. Use a consistent and well-documented evaluation method so that key stakeholders within the organization can follow your analysis.

• Review and rate responses against established criteria.
• Determine "best" technology based on cost, design and service.
• Question customer references for the top-three providers.
• Re-evaluate responses and develop recommendation.

3) Negotiate the final agreement.

• Reduce cost.
• Review business terms and conditions.
• Negotiate service-level agreements and terms.
• Partner with legal team to conclude agreement.

Cost-optimized network design

Once you've reduced the cost of existing service, look at other ways to reduce total cost of ownership through a cost-optimized design initiative. This refers to a design that lets you maintain the level of service while reducing the cost of providing that service.

Cost-optimized designs typically yield another 20% of savings in the first year of implementation. The amount of savings often equals, or even surpasses, the savings attained through strategic-sourcing efforts.

Companies that can benefit most are large organizations with infrastructures that have grown over the past several years and have not been audited to see what services are necessary and what are not; those that have grown through acquisition; or distributed business units that lack standardized and globally available services.