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Grow Your Business Finances

6 Easy Budget Cuts Every CIO Can Make

6 Easy Budget Cuts Every CIO Can Make Credit: Dreamstime.com

In today’s economic environment, CIOs are under constant pressure to cut costs from their budgets. But there are a number of easier ways that are usually overlooked CIOs can save money by reducing non-value IT spending, according to Matt Podowitz, a strategic management and IT consultant.

Here are some not-so-painful things to save money:

Ask for discounts from your vendors in exchange for signing longer contracts. "CIOs buy a lot of stuff and from a lot of different vendors and most of them are cyclical, which means the contracts get renewed," Podowitz said. "It's amazing the results that CIOs can get by [doing this]." For example, say there's a company that pays $10,000 for telecommunication services and the annual contract for those services is up for renewal in six months. The CIO can go to the provider and say, "If you cut our rate to $8,000 and hold that rate for 24 months, I'll sign a 24-month contract extension instead of a 12-month extension."

Turn a fix-cost contract into a pay-per-use contract.
"CIOs contract for a lot of services on a fixed-cost basis," he said. Maybe you're outsourcing your help desk and you’re paying the vendor $5,000 a month to handle an unlimited number of help desk calls. Podowitz said it's possible to go back to the vendor and say, "I don't want to pay for an unlimited plan, instead, I'd like you to charge me a fixed rate-say $25 per call." Then, after negotiating that new contract, look at your organization and figure out how to reduce the total number of calls without reducing customer service. One thing you could do is implement a self-service knowledge base on your website so customers can get the answers to their questions without calling your help desk, he said. “So take a fixed-cost contract, convert it to a variable cost contract, then reduce the amount of that variable service,” Podowitz said

Only pay for the software you actually use.
“CIOs should take the list of software that’s actually installed on their companies’ servers and workstations to their accounting groups and ask them to run an accounts payable ledger for every software vendor their companies are paying,” he said. “Nine out of 10 companies will find that they’re paying for a piece of software that they’re no longer using or that they acquired and never used. So they may be able to eliminate licensing fees or maintenance fees. I had a client that saved about $100,000 that way.”

Look for prepayment discounts.
If you’re paying a vendor monthly, ask if you can get a discount if you prepay for two years.

Go after vendors for performance penalties. There are performance penalties built into contracts in the event an IT vendor doesn’t deliver on his service agreements. Podowitz said very few companies ever go back, compare the service levels with the service-level guarantees and go after the vendor for stipulated damages, if any.

Don’t pay for goods or services to benefit your vendors when your company doesn’t use or benefit from them. “Maybe you have a supplier that manages inventory at one of your warehouses, so you put in a T1 line between your warehouse and the supplier’s data center so the supplier can access your system and manage your inventory,” Podowitz said. “But why are you paying that $1,500 a month? Chances are it wasn’t stipulated in the contract. So go back through and figure out what you’re paying for in the IT realm that you don’t actually have to pay for and get the supplier to pay for it and, once more, get the supplier to pay back what you already spent.” And you can use the money you save by making these cuts to fund critical business and technology initiatives, he said.