Affordable IT: Budget Beaters

T organizations are getting creative in cutting costs. Learn which strategies could pay off and which might carry too much risk for your enterprise.

August 30, 2004

11 Min Read
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IT professionals are becoming scrimpers, scavengers and skinflints. They're using every means at their disposal to do their jobs while staying within underfunded project budgets.

"There's no such thing as full funding anymore, for any project," says Michael Golden, an IT manager at Unique Fabricating, a manufacturing company in Auburn Hills, Mich. "It's standard operating procedure to pursue the least expensive path to a goal, and usually compromises are made along the way to deal with unanticipated expenses."

Apparently, Golden speaks for most of the industry. In a survey of more than 600 Network Computing readers, more than 85 percent said they're forced to do at least some of their projects on a shoestring budget. More than 15 percent said all their projects--even those affecting critical operations--are underfunded. Eighty-two percent said at least some of their IT projects are being done with a skeleton crew, and 29 percent reported that all their projects are understaffed. Thus, products that require heavy development and customization are out; systems that work out of the box and don't require extensive staff time are in.Wait a minute: Isn't the economy coming around, and IT spending on the rise? Yes, but those upticks won't change IT's focus on saving a buck. In a study by Forrester Research published earlier this year, 54 percent of IT executives cited "cutting IT costs" as their first or second priority for the year.

With the prevalence of open-source software, diverse channels for new and used equipment, and a wider range of outsourcing services, penny-pinching is no longer just a professional IT skill; it's an art form.

"Deploying old PCs, using PCs as servers, avoiding newer technologies--you name it, we've probably done it," says an IT executive at a large West Coast bank. "It may not be the best solution, but if that's what it takes to get something started, then that's what happens."

While such creativity is a fact of life at most IT shops, it's not something most execs are bragging about. Indeed, most of the people we interviewed for this story spoke on condition of anonymity. But maybe it's time to admit--horror of horrors--that the most efficient solution isn't always the state-of-the-art technology sold by the leading vendor capitalizing on the latest industry trend. Maybe, for some projects, "good enough" really is good enough.

Savings StrategiesMoney-saving tactics are almost as diverse as the IT organizations that employ them. One of the most frequently cited strategies is deploying used equipment. In addition to the many established firms that sell used PCs and servers, dozens of other companies specialize in refurbished networking gear, including switches from Cisco Systems, Extreme Networks and F5 Networks. Since 2001, IBM's annual sales of off-lease equipment have soared from around $150 million to more than $250 million.

A new favorite market for used equipment is eBay. In a typical week, the consumer auction site lists more than 4,400 networking equipment items, 5,500 PCs and components, and hundreds of server hardware and software items.

"Clean, reliable off-lease Dell servers are plentiful on eBay," says Unique Fabricating's Golden. "Machines that sold new for up to $40,000 can be had for around $1,000. Even with RAM upgrades and new SCSI drives, we can have a quad-processor server operational for under $3,000."

Companies are also buying off-brand commodity products that offer the same functionality as well-known products at a fraction of the price. Jim Huntley, network administrator at City National Bank in Kilgore, Texas, says his company bought an off-brand Ethernet switch for $150; similar new products from Cisco list for $3,000.

Other organizations are saving money by postponing, if not eliminating, the "automatic upgrade" that became standard procedure in the 1990s. "Our mentality is 'if it ain't broke, we ain't gonna fix it,' " says Andrew Rossetti, CTO at Felton Bank in Felton, Del. "Unless we add an employee, we are not purchasing new PCs. Unless a printer, router, monitor or other device breaks, we are not upgrading."Enterprises are also taking a hard look at what existing hardware and software is being underutilized. More than 57 percent of IT executives surveyed last year by Enterprise Management Associates cited "reclaiming and/or repurposing hardware and software that is underutilized" as a top priority for 2004. More than 64 percent said they're increasing time and money spent on asset management.

Many enterprises are lowering software costs by using freeware, shareware and open-source alternatives. Nearly all the IT execs interviewed for this article cited open-source software as an element of their cost-cutting strategies. For some, open source is the only option.

"When you have very little money to spend, everything has to be built on open source," says an IT manager at an Issaquah, Wash., professional services firm. "We are building an environment that uses nothing but open-source technology: TomCat server, MySQL, Java, Tiles, Struts. For most companies, the big-dollar systems are like swatting a flea with a bazooka."

Outsourcing is another cost-cutting option, but an imperfect one. In our survey, outsourcing ranked as the product category that yielded the least value in the past year, mostly because it didn't produce the promised cost savings.

Another tool available to funds-starved IT managers: creative budgeting.A member of the technical staff at a San Jose, Calif., software company needed to replace computers at a remote location but had no budget to do so. He found a great deal on PCs budgeted for another project, so he bought extra machines and charged them to the second project. "These were sent to the remote location," the staffer says. "The growth in the transaction was not noticed by upper management." Several executives say they employ a similar strategy for staffing: They borrow personnel from a better-funded project, often without telling management.

So how do enterprises decide which projects will be only slightly underfunded and which ones will truly be done on the cheap? "Business impact" is the standard answer, but IT administrators say the highest-priority projects often are those that solve the biggest current problems affecting the noisiest users. "The squeaky wheel gets the resources," says one IT executive.

An MIS director at an Ohio steelmaker agrees. "If it affects production, or if [a piece of hardware or an application] dies, it gets funding," he says. "Everything else seems to fall into the 'maybe' category."

The chief filters for IT-project budgeting are security and business continuity, says Felton Bank's Rossetti. Antivirus, firewall, patch management and other security-related projects get top priority; software upgrades don't. "In those cases, we often look for cheap or free alternatives," Rossetti says.

Some IT execs manage to stay within "discretionary spending" limits so they can personally authorize purchases without higher-level approval. Nearly 40 percent of respondents to the Network Computing survey said they're authorized to do some level of discretionary spending; nearly half of them have a limit of $10,000.Assessing the Risks

While IT managers admit (anonymously, at least) to cutting corners, virtually all of them acknowledge some risk. The chief problem is that most low-cost technologies and quick ROI schemes carry a proportionately low level of post-deployment support.

Used equipment, for example, is typically bought post-warranty, and getting vendor support for a secondhand device can be expensive. Most refurbished equipment sellers offer a warranty of 90 days or less on their products; many sellers on eBay don't even guarantee that the product will work out of the packing crate.

Dollars and Sense

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"We've run into situations where auction equipment didn't last very long or had to be replaced sooner," says an IT administrator at a Seattle-based law firm. "Sometimes the overhead of cheaper choices is less automation or more difficult troubleshooting for IT." Similar problems can occur with clone equipment, which is manufactured cheaply but seldom includes the support offered by a leading vendor, he says.Vendors who build software based on open source generally offer some level of support, though it may be limited because they don't own the software-design specs. Many freeware products offer no support at all, except for message boards where users exchange ideas on implementation and troubleshooting.

Buying hardware and software in bits and pieces can also lead to integration and maintenance problems, Rossetti observes. "We're supporting more individual pieces of hardware and software, which could impact long-term user support costs," he says. "In an ideal world, we would have every user using the same model of printer, the same monitor and the same version of Office. Given our piecemeal solution, support costs will likely be higher in the long run."

Likewise, custom-developed or jury-rigged systems may save money in the short term, but they can jeopardize system availability. The San Jose software company, for example, needed a firewall but didn't have the budget for it. "We went creative and used a software solution in a surplus PC to perform the function," says the technical staff member. "It works OK most of the time, but occasionally it gets overwhelmed with traffic. Someone has to keep an eye on it and wake it up if we're suddenly unable to communicate with the Internet."

Budget and staff juggling can also create problems by raising unrealistic expectations of what the IT organization can do, says an administrator in a large state government IT department. "The true costs were never documented," he says, "not only in your shoestring budget project, but in the projects you've robbed from."

It's important to understand that you're making a trade-off. In many cases, a solution that seems cheap up front will create unanticipated costs and headaches on the back end. But if you can determine that the benefits will outweigh the costs over the long haul, it might be time for your organization to cast off those leading-vendor, state-of-the-art shackles and find out if "good enough" really is good enough.In this special issue of Network Computing, we document some of the ways IT professionals are making projects more affordable.

In our lead article, we take a broad look at cost-cutting measures, including the deployment of used equipment, reliance on open-source software, the use of outsourcing services, and the juggling of budgets and staffs. These clever methods to save a buck often provide a legitimate alternative to high-cost, state-of-the-art technologies (See the rest of our special issue), but they carry some long-term maintenance risks.

Other articles in this special issue offer a closer look at selected aspects of affordable IT across our core technology areas. And in "Talk Quick and Dirty to Me", contributing editor Jonathan Feldman shares some hard-won wisdom on when to do it on the cheap and when to go to the mat for more resources.

We hope this issue will help bring the cost-cutting process out of the closet and provide a starting point for constructive discussion on which IT initiatives can be done on a shoestring--and which ones can't.

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