How to make the most of your IT budget

Few organizations have to pinch pennies more than nonprofits, which depend on charitable giving and grants for their funding. We asked IT executives from three well-known nonprofits to share their creative ideas for getting the most mileage from their IT budgets. IT leaders in all industries can learn from these techniques.

1. Consolidate servers.

When Dennis Shaw joined the Smithsonian Institution in Washington, D.C., in 2000 as its first CIO, the museum group had 149 file, print, e-mail and directory servers, connected to 80 LANs. Some were so old that they used 386 processors. Shaw came up with a two-step plan for standardizing on NetWare and reducing the number of servers to 76, which were then clustered to eliminate points of failure. This server consolidation, which took more than three years, has improved availability and reliability while also reducing costs. “The savings are in cost-avoidances related to maintaining and replacing servers,” Shaw says. “We saved money on hardware and software licenses, too.”

Additional savings came from eliminating a third shift of IT workers and reducing the second shift to one person. With newer, more reliable servers, Shaw can meet his service commitments with fewer people. “During normal business hours, we are providing 99.998% availability,” he says.

2. Don’t delay equipment upgrades.

Jim Thie was hired as Habitat for Humanity’s first CIO in 2005 to help bring standard business practices to this Christian organization in Americus, Ga., that builds homes for the poor.

That’s one reason Thie is sticking with standard equipment refresh rates: Laptops are replaced every three years, and desktops and servers are replaced every four years. “Just because we’re nonprofit doesn’t mean that we have less computing needs or needs for power,” he says. “Constant tech refresh allows us to keep up with demand.” Stretching out the technology refresh cycle drives up an organization’s maintenance costs and reduces reliability, Thie says.

3. Replace old phone systems with VoIP.

The Smithsonian once had a hodgepodge of telephone systems, including Centrex, PBX and old-fashioned key systems. Verizon notified Shaw that it refused to maintain 70% of the organization’s telephone systems, because they were too old. In 2002, he embarked on a VoIP project and selected Cisco IP PBXs and phones.

“At the time, Cisco was the most mature of the VoIP products,” Shaw says. “But we probably would have picked them anyway, because we had Cisco routers and switches. Our backbone network is all Cisco.” By migrating to VoIP, the Smithsonian has reduced the annual cost of its voice services by $2.3 million per year, so far. When the VoIP systems are fully implemented later this year, the annual savings will rise to more than $3 million per year.

“What really swung the decision to VoIP was the cost of the cable plant,” Shaw says. “We’d already made that investment in our data network, but our telephone cabling was old. In the National Museum of Natural History, the telephone cables were over 50 years old. The economics clearly indicated we should go to VoIP.”

4. Consider bringing key functions in-house.

Mark Donatelli, network administrator for the Joffrey Ballet in Chicago, used the call-handling features of a new VoIP deployment to bring telemarketing and fund-raising functions in-house.

“We are providing better call handling in terms of directing people to automated attendants,” Donatelli says. “Fewer subscribers are lost, and that’s important because subscribers are the lifeblood of this organization.”

Because its ticketing and donation software are integrated, the Joffrey also provides better service to its subscribers. “We can pull up a record and see that a subscriber has given certain monetary gifts, so we can give them a certain level of service, such as discounts or upgrades on tickets,” he says. “We can make them feel connected to the organization so they are more inclined to continue helping us.”

He also saved money by bringing e-mail and Web site hosting in-house instead of continuing to use SBC, noting that he got a discount on Exchange licenses. He recommends this for smaller organizations.

5. Manage your service contracts.

Thie has saved Habitat for Humanity $100,000 in the last year by improving IT contract management, particularly for telephone services. He says he hopes to double this amount of savings next year. “There are big savings that can be found in vendor management for recurring costs,” Thie says.

Before Thie arrived at Habitat for Humanity, the organization paid its telephone bills without analyzing them. Thie double-checks bills for accuracy and looks for ways to cut costs by collapsing lines and renegotiating rates. “I took one of my vendors for conference calling down from 10 cents per minute to 5 cents per minute,” Thie says. “It’s practices like that from the corporate world that I am applying at Habitat for Humanity.”

Thie says all CIOs should review their IT contracts and try to renegotiate rates even if the contracts are not due for renewal. “If you know there is better pricing out there, push to get your rates lowered,” he says. “All of these companies will reup the contracts, especially telephone service providers.”

6. Form partnerships with your vendors.

If your company is a well-known organization, you may be able to get discounts on equipment or services by agreeing to be a case study or reference customer. Donatelli got a great deal on the dance company’s new VoIP system by partnering with Avaya for its Compact Contact Center.

In return for wholesale prices on telephones and no labor fees, the Joffrey allows Avaya to refer to it as a customer in the vendor’s advertisements.He purchased an IP PBX, server, software and 65 IP phones from Avaya for about $16,000, noting that that price was 60% to 70% of competing vendors’ prices.

7. Standardize software.

In 2000, the Smithsonian had 28 separate financial systems, including a 14-year-old version of Walker Financials, which was no longer supported by the manufacturer. CIO Dennis Shaw moved the entire organization to PeopleSoft Financials in a migration that took one year to complete.

“This was a survival measure,” Shaw says. “I had calculated that in the aggregate we were spending $9 million a year for financial systems. Now we’re spending less than that. But my focus wasn’t just on saving money. It was on getting financial systems that worked.”

Shaw says the Smithsonian has benefited by having integrated financial systems for managing grants and major donations. As PeopleSoft releases new software modules, it is easier and less expensive to implement them across the Smithsonian now that the organization uses a common financial platform.

“Everyone should be consolidated on one financial package,” Shaw says. “And you don’t need multiple HR systems, either.”

8. Award multiple IT support contracts.

To save on its IT support costs, the Smithsonian recently awarded 10-year contracts to five vendors. With this approach, the Smithsonian hopes to benefit from reduced costs for help-desk support, desktop deployment, cabling and administration for databases, LANs and WANs.

“The rates are a lot better than we had before,” Shaw says. “The idea is to have ongoing competition among fewer vendors. That’s the one thing that will drive down the contractor costs.”

In the past, the Smithsonian ran a competitive procurement but selected only one contractor. The multivendor approach allows the Smithsonian to benefit from ongoing, managed competition.

“We had 250 responses to our RFP,” Shaw says, pointing out that contractors were eager to win a contract with the Smithsonian, because it is a household name. “The rates we are seeing are 20% cheaper than we saw before.”

9. Emphasize strategic initiatives.

When Jim Thie puts together the annual IT budget for Habitat for Humanity, the CIO breaks it into three categories: mandatory, strategic and discretionary.

Mandatory items are required to keep the doors of the organization open, including the cost of running existing computer facilities and any contractual obligations.

Strategic initiatives add top-line value to the organization or reduce expenses.

Discretionary items such as adding new fields to databases or preparing new reports can be delayed if necessary.

Thie has been successful at keeping his IT budget intact throughout the year with this approach.

“My focus is mainly on driving strategic initiatives,” Thie says. “In that way, I’m not that different than your typical for-profit CIO.”

Thie says this approach has helped him gain backing from Habitat for Humanity’s top executives for his IT initiatives. For example, his IT budget of $9 million is up $1 million from last year.

10. Foster employee commitment to your mission.

Thie has no trouble recruiting or retaining IT staff, because employees are so committed to the home-building mission of Habitat for Humanity.

“We have an extremely tangible mission that people can relate to,” Thie says. “We have an extremely strong brand.”

Thie says people who work for Habitat for Humanity are so committed to this mission that they are willing to live in a remote area and receive a smaller paycheck than they would in the for-profit world.

“For profit organizations have mission statements that they proudly display, but there is a gap in getting people to internalize and personalize the mission,” Thie says. “This is a faith-based organization, and it is very personal for people. For many people, working here is a calling. So how do you make that same internalization of mission applicable in a for-profit organization? How can you personalize the mission so that people feel like sacrificing for the team? It’s doable in the for-profit world but maybe not to the same intensity level that it is here.”

11. Eliminate outdated systems and software.

When Donatelli became the Joffrey’s first in-house IT executive two years ago, he found the world-famous dance company’s systems antiquated. The ballet company had no network at all.

Donatelli set up a VPN between the company’s main administrative office and its studio. The VPN supports remote dial-in so executives can access information when the company is touring around the United States or internationally.

Having current technology “definitely gives us a competitive edge,” Donatelli says. “We are able to compete on the level of a big business, especially with respect to mobility. Our executives can travel and work while they’re on the road. They can get updates so there are open lines of communications. . . .We’re way ahead of the curve technologically when it comes to other arts organizations.”

Donatelli also standardized all of the users on a common software platform, including Windows XP, Exchange 2003 and Office 2003. Previously, the Joffrey was running Windows 95, 98, 2000 and XP, as well as Office 98 and 2000.

“In a nonprofit, there are a lot of less technically oriented individuals, so it’s important to make everything familiar so there isn’t much training for the end user,” Donatelli says.

Donatelli says he immediately saved money on software maintenance by upgrading and standardizing all of the Joffrey’s desktops.

“Microsoft gave us a discount, because we’re a non-profit,” he says. “Office retails for $2000 per license, but we got it for $50 per license.”

12. Use all the features of your gear.

The Joffrey last fall upgraded its copiers to newer models that allow them to create PDF files and e-mail documents. Thanks to its new Xerox CopyCenter 255, the Joffrey Ballet has slashed its fax and Fed Ex costs.

“We have a lot of international dancers, and we send them lengthy contracts that have to be signed,” Donatelli explains. “Now we don’t have to send them out via overnight mail. We can send them via e-mail instead of fax, so we are able to use the bandwidth we’ve already paid for.”

Donatelli also uses the copiers as color printers. “It’s cheaper to support color toner than it is to support color ink,” Donatelli says.

Donatelli recommends using all the features of today’s copiers. “It’s not just a copier,” he says. “It’s a printer, it’s a fax machine and it sends e-mail. So it serves triple duty. Now we only use our fax for incoming faxes, so we don’t have to have the extra telephone line for outbound faxes.”