Quick wins: cutting corporate waste

You know how ugly it is out there. The cost of products we buy every day is jumping. It’s only been a few weeks since the Consumer Price Index made the news for days on end as TV channels and newspapers tracked its steady climb. Globally, banks are being bailed out and markets forecast doom as consumers snapped their wallets shut.

CEOs expect the economy to grow at a skimpy 1.3 percent this year, according to a survey of 110 chief executives conducted by the Business Roundtable. That’s the slowest growth rate predicted by the CEO community since the post-9/11 and post-bubble year of 2002.

“Companies have to do something now,” says Erik Dorr, senior IT research director at the Hackett Group, a technology management consulting firm. But “it’s better to think it through than make cuts in a reactionary way.” We scouted for examples from across the world and India of tactical projects that you can execute in a few months and reap rewards quickly.

You have to be smart to keep your job. One way to display your smarts is to seek and destroy all money-sucking waste at your company. Here’s how:

Curb Attrition

Savings: Rs 70,000 (US$1,358) per recruit

They call it the ‘honeymoon period.’ But it wasn’t sweet for Intelenet Global Services, whose new recruits joined the company only to leave it in the first 90 days (their training period).

For all the training and money the company invested, it got back sleepless nights. Intelenet Global Services is a business process outsourcing company, which recruits a minimum of 500 employees every month and spends between Rs 50,000 and Rs 70,000 to nurture a new hire before he or she is inducted into the business.

With a significant attrition rate during this incubation period, a lot of this money was being wasted. “If we spent in the range of Rs 50,000 to Rs 70,000 on one person and there’s 20 percent attrition, you can estimate the direct monetary losses, forget about the loss of manpower for as many days in future,” says Deshpande.

But in the BPO industry, attrition comes with the territory. “If we are not hiring people with the right skill set, it causes attrition. Any discomfort in the mind of a new employee can result in attrition. If a person is hired for one capability and he is put into an alien process, it’s quite possible that he will leave,” explains Rajendra Deshpande, CTO, Intelenet Global.

With so much being spent on a new recruit, it became crucial for the organization to keep an eye on a new recruit’s lifecycle during the pre-hire and orientation phases to understand why they were leaving. Intelenet couldn’t know because there was no real-time data available to gauge that.

As each department and business unit managed its own data separately, it resulted in numerous isolated excel sheets. A lack of a centralized data warehouse was beginning to worry the company and its COO, Prabhu Srinivasan, turned to Deshpande. “He looked very bugged with this issue and demanded for a single spreadsheet instead of disjointed islands of information,” says Deshpande.

The company desperately needed a system to keep track of its employees’ lifecycle and curb attrition. And it needed it fast. Deshpande and his team came up with the ‘Incubation Tracker’: an in-house system developed using .Net technology that could not only help check attrition but also lead employees to a productive stay in the company.

“The biggest risk that we faced during the execution of the project was the ability to deliver the project as per business timelines. The management wanted to deploy the solution as a top priority and had an ambitious timeline of three months to roll it out across the organization,” says Deshpande. But Deshpande delivered. It was all done in three months. The internal team at Intelenet started work on the project on July’07 and the system was up by October’07.. “

But instead of calling it a tool to curb attrition, Deshpande has named it ‘Retention Matrix’. The system provides insight on parameters such as right hire quality (finding the right people for specific processes depending on their experience), training yield percentage and trainer yield percentage, among others, that are crucial to control attrition and improve retention. The tool is hosted on a common domain and can be accessed by authorized users. It now gives a single window of information to the executives responsible for hiring at Intelenet. Now, the company can analyze the qualifications and readiness of a set of people to be deployed into any process.

“The manual process had a tinge of individualism, which resulted in natural flaws. We lost on standardization and were not able to see the same picture across the organization. At the end, it was a disjointed image,” he says. This affected new recruits in the HR department as it took a lot more time for them to understand the process of gathering data from different locations.

But, with the centralized system they can see a single datasheet about any person. All the information now generated by the Incubation Tracker is available to the hiring executives at the click of a button. “Today, this system is designed to enable the simultaneous login of 4,000 users and can capture close to 25,000 records. And it can be scaled to include more users and locations,” says Deshpande.

The project cost the company between Rs 7-8 lakh and brought in great benefits. There’s a 85 percent improvement in the turnaround time for MIS requests: if, for example, a manager wanted to know the number of classes a trainee attended or missed, the system can automatically provide an answer.

“The system has resulted in increased productivity for trainers too. By entering training scores against a candidate’s history, it is possible to identify issues with training batches, performance and alter training to employee requirements,” says Deshpande.

These tweaks have resulted in a 10-15 percent drop in attrition and it is continuing to drop further. “The Incubation Tracker has significantly increased cost consciousness and guided our efforts to arrest attrition across sites and improve our hiring quality,” says Srinivasan, COO of the company.

“There’s an absolute end-to-end view for the business from the day a prospective employee registers till the time he or she is allocated to a business unit. And that information is available at the click of a button to take proactive measures to check attrition. What you don’t manage, manages you,” concludes Deshpande.

Move Out of the Office

Savings: 50 percent of infrastructure costs

A penny saved is a penny earned. It’s an idea that Bangalore-based Consilium Software, a unified communications software and solutions provider, has embraced as their motto. With true start-up daring, the company that got off its feet in November 2007, decided to use its clean slate to break away from the Opex-heavy model other companies follow. Nothing was radical enough if it cut costs: not even telecommuting.

The work-from-home idea, however, was met with skepticism. In India, it’s an approach associated with unknown companies whose back-of-auto-riskshaw advertisements egg on housewives to earn a quick buck. But Col. Arvind Saxena, group CIO at Consilium, who honed the idea in December 2007 — a month before he signed up with the organization — was convinced it had promise. And he’s not someone given to whimsical ideas.

As the man who gave India’s first-ever low-cost airlines its teeth, Saxena is comfortable with radical business ideas that are driven by IT. When he was the CIO of Air Deccan (he was part of the start-up team), he created the IT system that allowed the airline to slash the price of its tickets by 24 percent. It created a new industry and many me-too’s.

But like most good managers, Consilium’s bosses were apprehensive that without tight supervision, productivity among tele-workers would decline sharply. There were also fears that sucking staffers out from the office would “undermine teamwork and organizational cohesion,” says Saxena.

However, the thought of saving on real estate and other expenses like security deposits, electricity and air conditioning, says Saxena, kept them from throwing the idea out.

Saxena assuaged their fears by proposing to use technology to increase communication for collaboration. He introduced the idea of daily and weekly conference call meetings to get progress reports. He also supported the idea with technology. “We have a presence-based application which tracks how many hours a telecommuter spends working online and how many hours he or she is offline. Clubbed with customer feedback, we can figure out how many productive hours a telecommuter puts in every day and how efficient their services are,” says Saxena.

After much deliberation, Consilium’s management realized that this compelling business proposition could reduce cost without compromising efficiency. The next question was whether everyone was eligible. They decided that the program could safely be extended to staffers whose jobs lent themselves to telecommuting, including sales, marketing and IT. Because sales and marketing, for instance, had to be available in various time zones (for clients anywhere between the US and China), working from home not only saved the company infrastructure overheads, it actually increased productivity.

“Because we commuted to office everyday, we were not available to our customers across a wide-ranging geography,” says Venkat Raman, AVP Sales (APAC) and a full time telecommuter. “Sometimes, customers called us while we were in transit and wanted us to attend to an urgent need and we wouldn’t be able to take their calls. But now we are available 24 hours a day.”

Given the different time zones they need to service, the telecommuting model also allows for more flexibility. “Take for instance, if a task requires a salesperson to be available for a customer at a specific hour. This issue has been addressed by the tele-working model,” says Raman.

With salespeople getting familiar with video conferencing, they’re taking kindly to meeting their clients over the Web — something CIOs have found hard to convince salespeople to do. Saxena says there’s been a 15 percent uptick in telecommuter productivity and that teleconferencing has reduced travel by 30 percent.

But work-from-home isn’t for everyone. Even among the departments that are eligible for the program, Consilium decided that only senior management — those who were proven performers and had a high level of maturity — was chosen.

These staffers are provided with dedicated home workstations. Each telecommuter is given a laptop, a broadband connection, a data card and a printer. Saxena says that it costs Rs 50,000 to set up a home workstation. And it costs Rs 2,000 a month to support each person, including Internet, printer and telephone bills.

Apart from this, the telecommuting initiative has also reduced Consilium’s infrastructure cost substantially — from the word go. “The company has realized a savings of around 50 percent on real estate, office overheads and travel reimbursement. And this has raised our profit margin,” says Saxena. The program has also reduced the company’s electricity costs by 37 percent.

Telecommuting promises business benefits in the long run, too. It creates happier customers who can now be serviced faster because they have better access to Consilium’s staff. The flexible working arrangement has considerably reduced the stress from commuting. “We’ve reduced traveling to the office by 90 percent,” says Saxena. This has resulted in happier, more in-control employees. “On an average we take on 30 to 40 percent more work every day,” says Raman. “And we have also been able to strike an optimal work-life balance. This has reduced absenteeism and time off besides inducing a high level of motivation.”

With that satisfaction, attrition has come down. “Our capacity to retain talent has improved. In the past nine months, there has been no case of attrition among the telecommuters,” says Saxena.

Saxena believes that a telecommuting option is the second best recruitment inducement after salary. From experience, he says, it is an appealing option for many potential employees. “I have been flooded with applications. This has made recruitment simpler and more cost-effective,” says Saxena.

And, as a start-up working in a business landscape characterized by aggressive competition and shrinking margins, every additional benefit helps. But start-up or not, there are lessons here for everyone.

Consolidate Cell Phone Services

Savings: 30 percent of monthly charges

BlackBerry, iPhone, cell phone, pager — personal devices of every sort were rampant at Title Resource Group, a real estate closing company that’s part of the US$6 billion (about Rs 24,000 crore) Realogy, which owns Century 21, Coldwell Banker and other franchises.

This time last year, Title Resource employees could use any cell phone they wanted for work, even personal devices that they, not the company, owned. Corporate calling plans for managers, sales reps and other employees allowed for a few hundred minutes per month.

Some employees used a personal plan, even on a company-owned device. Other employees submitted cell phone charges on monthly expense reports, says Nehal Trivedi, CIO at Title Resource.

As a result, the company didn’t know exactly how much money it was spending on cell phone bills. But Trivedi had the feeling it was too much.

“A thousand dollars a month raises a lot of eyebrows,” he says. “If it was your home bill, you would look into it no matter how affluent you are.”

Trivedi needed data to make a business case for reining in cell phone expenses. So business intelligence specialists in IT worked with corporate finance to collect the data from invoices and expense reports. Armed with specifics, Title Resource then negotiated contracts with two preferred cell providers, AT&T and Verizon, that gave the company better rates.

Employees were then categorized as minimal use, voice-only use and voice-and-data use, Trivedi says. Minimal-use employees are capped at $40 (about Rs 1,600) per month in usage. Voice-only people get plain cell phones, not smart phones. Those allowed voice-and-data plans can get BlackBerrys or other smart phones.

Title Resource enforces the limits by sending spending reports to senior managers every month, detailing whose monthly bills were highest. “We started paying attention to the top talkers, and [their bills] are difficult to justify,” Trivedi says.

The project took a few months, and the company saw savings with the first phone bills, Trivedi says. He declines to specify how much he’s saved, but says companies can knock 30 percent to 35 percent off their monthly cell bills this way. Corporate cell phone usage policies are increasing, as the devices themselves pervade companies.

Savings from a project like this depend on the level of control the company exerted on cell phone usage at the start, says Erik Dorr, senior IT research director at the Hackett Group. “If the starting point is entirely unmanaged and the new state is tightly controlled,” he says, “then 30 percent to 40 percent is entirely reasonable.” International roaming charges are especially expensive.

Of course, there was pushback. If there’s one thing people grow attached to, it’s their phone, smartphone, handheld device, PDA — cool devices define the corporate self the way a fancy car might. One recent study showed that while BlackBerrys dominate the enterprise, iPhone users are happiest.

Trivedi had to tell people that yes, they must give up ownership of their main work device. But after he showed them examples of how much they’d be saving the company, most bought in, he says.

If employees wanted to keep a second device, they could choose to do so at their own expense. And they did get to keep their old phone numbers. Finally, the top-talker report loomed, he says. “No one wants their name on there.”

Turn Off Idle PCs

Savings: Rs 12 crore

When the CIO also leads the company’s environmental efforts, the IT group, for better or worse, gets to be front and center in the green movement. Going green can save greenbacks, which is a welcome notion at Washington Mutual, which suffered heavy losses in the subprime mortgage crash. Washington Mutual (WaMU) laid off 1,200 employees and took the chairman title away from CEO Kerry Killinger in June. Wall Street doesn’t expect the company to post profits again until 2010.

The bank has cut its PC-related greenhouse gas emissions by 65 percent and will save $3 million (about Rs 12 crore) on electricity costs this year, says Debora Horvath, WaMu’s CIO and head of the environmental council. Horvath has set the bank on other green IT initiatives, including getting legal to use less paper.

The savings from this bank-wide PC project, though, will come from Verdiem power-management software, which WaMu installed on its 44,000 PCs last year, after a 100-machine pilot last spring. The software monitors activity on the computers, powering them down when they aren’t in use. Less electricity used, more money saved. Cost-cutting drives most green IT initiatives, followed by efforts to be more socially responsible, according to our survey of 280 technology executives.

At WaMu, Horvath’s team set up the system so that during business hours of 8 am to 6 pm, PCs and monitors in WaMu’s retail branches remain on. At WaMu’s back-office locations, monitors turn off after 20 minutes of inactivity and PCs go into standby mode after 30 minutes of inactivity. At 6 pm every night, if there is no activity, PCs go into standby and the monitors turn off. Employees working after hours can delay the software from powering down.

Laptops were removed from the rollout because ROI wasn’t as great as on desktops, a spokesman says, adding that that assessment was based on a study performed by the vendor. The entire project took a few months to roll out.

Nix stuff You Don’t Need

Savings: Millions, potentially

The US Department of Defense budgets $20 billion (about Rs 80,000 crore) for information technology in a given year and no one person or spreadsheet or database keeps a running and accurate count of all the pieces of hardware and software in action.

That’s not unusual for any large organization, which is why the asset management discipline emerged. The first step is figuring out what useful and not so useful computer gear is hanging off your network, then lay to rest those wasting time and money. A project to do that at the US Army has so far produced multimillion-dollar savings and now the DoD itself wants to replicate it, says Joe Paiva, a leader in the DoD responsible for IT portfolio management strategy and policy development.

Paiva worked with asset management software from BDNA, a private company in Mountain View, California. In one day, he and his team installed the BDNA Insight ‘agentless discovery’ product on servers in one Army office, to search various servers and PCs at major Army bases and facilities.

‘Agentless discovery’ means the software automatically crawls an IP network to record every device and piece of software attached to it. Initial scans take about a day, Paiva estimates. BDNA Insight then spits out a report that can be sorted by type of device, server crawled and other variables.

The process turned up some surprises and has helped the Army close money leaks. For example, across Army facilities, individual Oracle database and applications licenses were in use, sold to local military purchasing agents by value-added resellers. By moving those to an enterprise license and maintenance contract with Oracle directly, the Army saved “tens of millions” of dollars, he estimates.

On the hardware side, the Army found some printers that were underused and others overused. “A big printer that should be doing thousands of pages a month was doing only 100,” he says. Paiva was promoted before the Army tackled printer reconciliation, but with a good asset discovery tool, he says, “you can very quickly see this doesn’t make any sense.”

As an ancillary benefit, the asset management program has helped the Army improve security. For example, Paiva’s team found versions of the FoxPro database, which Microsoft now owns, that the military stopped using years ago. “We found older versions of the database.” he says, “that potentially had vulnerabilities.”

Another example: at Fort Belvoir, an Army base, the software immediately found 103 copies of Google Earth, according to a presentation Paiva made after BDNA Insight was installed. While individuals can use Google Earth without a license, large organizations aren’t allowed to.

Also turned up at Fort Belvoir were 54 possibly unsanctioned copies of iTunes and several instances of Google Talk, which could allow unauthorized VoIP and instant messaging. “At installations where we thought we had all of the computers tightly locked down, it showed we had software which had been installed without going through our software approval and installation process,” he explains.

“This is not just an Army thing. Compliance is always a challenge in any big organization.” Managing employees using unsanctioned technology is a growing task.

Any large company can get the same benefits as the Army and the DoD, Paiva says. After serving for 10 years in the Army, he was an IT manager at a hospitality company and at a healthcare company. When the Iraq war started in 2002, he took a civilian IT management job with the Army.

Jack Heine, an analyst at Gartner, estimates that for organizations with no or very immature technology asset management programs, first-year savings could amount to 20 percent of the IT budget. Then 5 percent per year is possible for the next three years.

Get Help With Contract Negotiations

Savings: Over Rs 4 crore

No one wants to overpay vendors, but Lafarge North America was.

Patrick Kys, VP of IT and CIO of Lafarge North America, thought he wasn’t getting the respect — that is, the pricing leverage — he should get from the company’s major suppliers, such as AT&T, HP and Microsoft.

Lafarge North America is a private company, owned by Lafarge Group SA in France, that makes concrete, gypsum and other construction materials. With $6 billion (about Rs 24,000 crore) in sales, the company isn’t small potatoes.

But Kys and other senior managers didn’t know what level of discounting they could get and therefore weren’t sure they were as bold in negotiating as they could have been, Kys says. It’s hard for individual technology managers to get reliable information about what others are paying, he says, even from each other. Vendor contracts often stipulate that customers can’t discuss pricing. Maneuvering with vendors around the negotiating table takes practice.

To gain perspective, Lafarge North America last year hired NPI Financial, a spend management consulting firm in Atlanta. Within several weeks, NPI had reviewed the company’s contract with AT&T. NPI then reviewed other Lafarge North America IT contracts and concluded that it was overpaying several vendors. Right away, the company set to work to get better deals.

NPI advises many clients and negotiates for some, collecting benchmarks on vendor pricing across industries while keeping individual client data confidential. Kys says he got the inside knowledge he couldn’t get elsewhere.

NPI representatives guided Lafarge negotiators, and sometimes stepped in to negotiate, in contract talks with AT&T, getting the vendor to “do better” on pricing, says Sepehr Kousha, IT controller at Lafarge North America. For a negotiation with HP, NPI provided benchmarking, she says. “That’s very effective.”

“We took their arguments off the table,” Kys adds.

Lafarge is a big HP shop, using HP desktops, laptops, servers, printers, SAN products and various utility software. When it was time to renew maintenance and service agreements with HP, NPI spent two weeks assessing Lafarge North America’s current contracts against similar terms, conditions and pricing offered by third-party providers and against what HP was offering other customers, Kousha says.

“This helped us to not only improve our current-year prices but to also negotiate a multiyear deal, whereby our prices are not locked for the next 24 months,” she says. Those negotiations took about six months. That’s not unusual, as software pricing is not only costly but complex.

In a new networking and data telecommunications deal with AT&T, Lafarge has gained “seven-figure savings,” Kousha says. But she also declined to provide specifics.

Kys adds that that savings was 20 percent more than he had anticipated. He credits NPI for that. NPI is paid a retainer, with incentive-based fees as a bonus.

Telecom negotiations are usually intense, Kousha adds, but better informed, Lafarge staff persevered. “They try and wear you down and won’t come to a final price quickly. They try to make you give up,” she says. “We decided tactically to hang in there.”

Kys advises other IT leaders to add a controller or financial manager to the technology department. Most IT managers negotiate with vendors “sporadically [and] don’t have all the tactics to win.” Kousha reports to Kys, with a dotted-line reporting relationship to the corporate finance chief.

Next up for Kousha and Kys are contracts for storage equipment and Cisco’s Smartnet technical support.

Automate Administrative Tasks

Savings: Up to Rs 4 crore

Compliance. You can’t avoid it and you can’t keep failing it. The best you can do is make it cheaper and easier and good enough to pass audits.

Anyone trying to comply with PCI and Sarbanes-Oxley regulations knows that passing an audit hangs on demonstrating that you control employee access to sensitive customer and financial data.

So it was at Gap Direct, which oversees the e-commerce efforts of Gap, Banana Republic, Old Navy and shoe outlet Piperlime. But controlling access wasn’t simple in a mixed environment of mainly Unix servers, including Linux, and various Microsoft Windows operating systems.

Gap Direct uses Microsoft’s Active Directory administrative tools. Among other features, Active Directory lets system administrators grant and control end-user permissions more easily than many Unix tools, says Jeff Arcuri, a senior manager of IT at Gap Direct. Active Directory by itself doesn’t support Linux or Unix so Gap’s system administrators ended up having to assign employee permissions individually, to access different databases and applications, depending on the work they needed to do.

When it came time for PCI and Sox audits, auditors or system administrators had to collect the server logs manually to show who accessed what files when, for hundreds of servers. They could automate bits of the process with custom scripts but still, start to finish, the ordeal required up to 10 people working at least part-time on every audit, he says.

To automate more of the process and free up systems administrators for more valuable work, as well as make user access permissions in this mixed operating environment simpler, Arcuri deployed an identity management tool from Likewise Software. The software installation took about three months, early this year, and involved two to five system administrators at various points, Arcuri says. Installing identity management systems can help a company enforce policies for who can see what data.

Now the company has set up group profiles for several different kinds of employees, so administrators don’t have to configure profiles individually. Likewise also produces reports by user, by date and by server. The number of people working on a given audit has dropped to about five, Arcuri says.

“At the end of the day, we have to report on this stuff. The question was whether or not we could better our reporting,” he says. “Now we get more data in a faster time and a better return-people-to-work time.”

The implementation cost $400,000 (about Rs 1.6 crore) but the company expects to see several hundred thousand dollars to $1 million per year in savings, mainly stemming from more efficient use of system administrators’ time, Arcuri says.

Rahul Neel Mani is resident editor. Sneha Jha is a correspondent.