CIOIN

Common sense, they say, is uncommon among common people. But among CIOs it holds a special place as it can help them save what their business partners hold very dear: operation costs. Highly conventional methods, though least spectacular and most tedious, are the ones that hold the key when it comes to reducing IT’s operational expenditures.

And why is this pertinent? Because in mature organizations, opex alone accounts for nearly 60-70 percent of the CIO’s IT budget. And any cuts in these will not only help a CIO invest for the future but also increase his or her credibility while asking the management to loosen their purse strings for bigger projects next time around.

Here are a few common sense methodologies that some of your Indian peers leverage to lower their Opex.

Rationalize Your Application Portfolio
This is a structured process to assess the current IT portfolio, separate the value-generating applications versus the under-performing ones, and prioritize IT investment. It involves the following five steps:

Portfolio Cataloging: The first step in the rationalization process is identifying the resources to collect information regarding existing applications. “We are in constant touch with operation to assess the dynamic needs and usage of the organization,” says Rajendra Deshpande, CTO, Intelenet Global Services.

Application Inventory: The next step is to create an inventory of applications in a spreadsheet or database to collect all related information that could be used to perform various analyses in the next step. “In terms of an inventory we have created a pictorial view of all our IT resources. This helps us manage our resources efficiently while also rationalizing costs,” says Deshpande.

Portfolio Analysis: Now CIOs need to synthesize and derive meaningful information for executives to decide the next action. Some of the typical analyses include TCO, cost benefit, ROI, technical-business alignment, application-business process mapping and risk assessment. “For example, because of the visibility provided by the portfolio rationalization idle assets in Mauritius were simply transferred to Guatemala while opening a new office there,” Deshpande says.

Portfolio Disposition Recommendation: Ranking applications on various attributes is next. These attributes are basically divided into technical suitability, business alignment and cost. “We try and take the delta out of the system in terms of standard deviations. Bringing down the variations is what helps bring down the cost,”
says Deshpande.

Investment Sequencing and Roadmap: Once the recommendations are approved by the CIO or IT executives and the roadmap is crafted, look into the IT budget/investment plan and allocate a budget for different phases of the execution. “Knowing where we stand today tells me what among the requirements put forward by the management can be carried out with already available resources and what will require further investments,” says Deshpande.

Deshpande’s application portfolio rationalization project is saving his company Rs 2.9 crore on capex and over 4.9 crore on opex. That’s why more CIOs should focus on optimizing IT spending and improve contribution to the whole enterprise by using a strategic tool like IT portfolio rationalization.

Renegotiate Your Contracts
According to Gopal Rangaraj, VP-IT, Reliance Life Sciences, renegotiating IT vendor contracts is an intelligent way of cutting costs. Here are a few arguments you can use with your vendor to do that.

Technology is constantly evolving. So at the end of a year there are newer versions available. The availability of these options gives you firm ground to demand for upgrades at the same price if not less.

Even if you don’t plan to upgrade, you could demand to continue on the existing package for a much lower price—after making it clear that you have other options available.

For short-term investments, there are normally new technologies from a rival vendor. Comparing and contrasting your current investment with the newer options helps in asking for a better price on your present deal.

For long-term investments, your vendor knows it’s hard for you to rip and replace. Here CIOs should try and extract more out of the investments already made. While you might have an ERP, the onus is on the partner to help you better leverage it.

Piloting some applications in the cloud is also an approach which can shake up your vendors in terms of technology disruption. So that too can be an effective tool in the CIO armory.

Check Out Cloudsourcing

Check Out Cloudsourcing
Enterprises today are pursuing a thoughtful, well-architected, business case-driven approach to migrating to the cloud as a way to drive innovation while cutting down costs. They are moving from adopting point applications to building complete business solutions that bring together multiple cloud applications and cloud platforms.

This emerging trend is called ‘cloudsourcing’—sourcing a complete set of solutions to run a business on the public cloud, through a combination of cloud applications, cloud platforms and cloud infrastructure. “Unless you are in the banking or financial services industry, I think this is the way forward and the future. Rapid provisioning, better service and the cost benefits associated with it make it very attractive,” says Jawed Ahmed, head-IT, Sterlite Technologies. It also provides greater agility to the business by delivering a set of pre-integrated cloud applications which make it possible to provision swiftly and meet the business needs.

Cloudsourcers such as Appirio claim that this new trend can provide over 30 percent to 50 percent reduction in TCO. And it claims to achieve this by drastically lowering hardware and IT personnel costs. “We had 15 mail servers in-house and three dedicated medium-tier personnel with salaries ranging in the Rs 8-10 lakh bracket to manage these. When we moved this onto the cloud I got rid of these expenses,” says Ahmed.

Cloudsourcing is a systematic approach to sourcing piecemeal from the public cloud, the result of which is a well-planned portfolio of applications on a small set of strategically chosen, connected cloud platforms, well integrated into the overall enterprise architecture. This transition, however, will not occur overnight. CIOs will need to undertake this journey in a phased manner.

Consolidate and Reduce IT complexity
Redundancy, when it comes to IT, adds to uncontrolled costs that can hamper an IT organization’s ability to maximize IT’s potential, say Alexander Peters, a principal analyst at Forrester Research in a research paper. The remedy is IT consolidation, which creates cost savings and organizational benefits. Here are three basic approaches to IT consolidation:

Standardization. This approach makes assets and processes look alike. “Standardization of roles and processes help improve efficiencies and the savings from these are directly proportional to the scale of operation and the geographical diversity of the organization,” says Sanjiv Dalal, CTO, Firstsource Solutions. The result is typically a 3 percent to 7 percent savings on the baseline costs (the total cost to acquire and operate a computing system over its planned lifetime).

Centrally located resources. In this approach, equipment, applications, facilities, staff and other appropriate resources are moved together. “Previously, accessing a centralized datacenter from a remote location was difficult because of the huge communication costs associated with the WAN architecture. But today with a sharp decrease on that front, accessibility too is no longer an issue,” says Dalal. Relocating fragmented IT functions may save about a 5 percent to 10 percent on baseline costs through efficiencies and economies of scale.

Eliminating redundant capabilities. Cutting redundant capabilities such as hardware, software, and duplicate staff functions is the most difficult approach. “Virtualization eliminates the need for duplication and redundancies. This also gives far more flexibility in terms of redesigning architecture and saving money in terms of OS licensing,” says Dalal. This approach reduces costs and risks and has a potential savings of 25 percent.

According to Dalal, in the overall scheme of things, a minimum of 40 percent savings on opex is what a CIO can expect to gain from consolidation unless they are already running a highly optimized environment.

Go Green
Going green has its merits, especially if you are the CIO of an organization with a sizable datacenter. Not only do you save the planet when you lower your power consumption but you also save a lot of money. In fact, according to Gartner, energy-related costs account for approximately 12 percent of overall datacenter expenditure and are the fastest-rising cost in a datacenter. So any effort toward reducing this figure will help lower opex costs.

The issue only becomes more pressing with analysts saying that datacenter power, cooling and energy supply, and cost problems are likely to worsen over the next few years as organizations grow their technology infrastructure. “With upwards of 5 percent growth for server shipments predicted per year over the next two years, organizations need to forcefully control their energy consumption and costs,” says Rakesh Kumar, research vice president at Gartner.

The firm suggests the following actions to reduce power consumption and improve the overall efficiency of a datacenter:
Implementing row- and rack-based cooling for higher-density equipment can reduce energy consumption by up to 15 percent while making the datacenter more scalable. “We utilize water-based cooling that allows scaling up and down in different parts of the DC as per requirement. The cooling for us is active only to the extent of the real estate occupied by the racks inside the DC,” says G.N. Nagaraj, Director and CIO, Religare Enterprises.

Rightsizing the new datacenter by building and provisioning only what is needed—and then expanding only when needed—can reduce the long-term operating expenses by 10 to 30 percent. “We have only used up as much rack space as is currently required while provisioning for future need-based expansions,” says Nagaraj.

Using air economizers in certain geographies is a simple step with sizable rewards. Gartner says that many datacenters actually have air handlers with economizer modes on existing equipment but have it disabled from the early years when energy was not the issue it is today.

Paying particular attention to floor layouts, not only with respect to hot aisle/cold aisle factors, but with regard to overall air movement (distance) to reduce the workload on your air handling equipment. “We have planned how we populate the DC and taken a top-down approach to our cooling where the ducts can easily extend as we scale up the DC,” says Nagaraj.

Virtualize as much as possible—especially x86 equipment. “We have virtualized our environment on a 1:6 ratio and moved a lot of applications onto the common servers. That has pushed down power consumption,” says Nagaraj. These moves have saved Religare Enterprises cool 40 percent on their server base alone.