Reaching Deeper for Savings

You may be able to squeeze more out of your IT budget than you realize.

Leveraging Software-Contract Perks

Economic pressures have led technology vendors to become substantially more flexible about contractual arrangements; if you can’t get the price down as far as you’d like, consider pushing for more add-on services. For instance, when Rent-A-Center Inc. upgraded to a new version of an enterprise software product, the vendor threw in four weeks of free training, which saved the company $25,000, says KC Condit, director of information security for the chain of rent-to-own stores (see also “Have They Got a Deal for You,” CFO, February).

Negotiating Lower Contract Labor Rates

As technology spending has slackened, demand for contract IT workers has also waned. Tom Pettibone, founder and managing partner of IT consulting firm Transition Partners, says rates for IT contractors have dipped 10-to-15% compared with 2008. “Cost reduction is top of mind for everyone right now,” says Pettibone, the former CIO at New York Life, PhilipMorris, BMW, and other companies, “and suppliers also recognize that these are unique times.” In short, this is one more area where you can drive a hard bargain.

For his part, Russ Finney has been able to do better than that: as vice president of information systems at Austin, Texas-based Tokyo Electron U.S. Holdings Inc., he has driven at least 25% savings on each of the outsourced labor contracts his team has negotiated since February. In some instances, he says he has been able to pick up contract workers at half price, or even had third-party technicians added to the company’s IT help desk and systems-support groups at a very reduced charge, since vendors are sometimes reluctant to break up work teams.

Hiring Managed-Services Providers

“All politics is local,” legendary congressman Thomas P. “Tip” O’Neill once said. Sadly, the same is often true of IT support, but it doesn’t have to be. Rent-A-Center, for example, used to have store managers at each of its more than 3,000 U.S. outlets hire local companies to service their laser printers and replace toner cartridges. But “with the spending coming onesy-twosy, you didn’t get the big discounts,” says Condit.

In January, the company hired High Touch to manage its laser printers. By moving to a national managed-services agreement, the company saves nearly $100,000 a month in toner costs alone, says Condit. Plus, “it spares store owners from having to worry about printers,” although they have leeway to hire local help when appropriate. Managed IT services run the gamut from network infrastructure to security to applications management.

Thomas Hoffman is a freelance writer in Warwick, New York.

To see how targeted IT investments may provide more value than traditional budget cuts, click here.

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