Meeting budget constraints Featured

8:00pm EDT August 26, 2009

Businesses are all under the gun to reduce spending on IT and simultaneously preserve head counts. What they need are options: for meeting budget constraints as well as keeping the people on staff who know their complex IT environment best. Ultimately, this economy will rebound, and businesses will want to have that head count available to them for the important projects.

Most companies have worked with an original equipment manufacturer and may not be aware of the cost savings that can be derived from integrating an independent service organization into the process.

“Basically, what they’re going to get from an ISO is the same level of service that they pay for now with an OEM,” says Ed Kenty, president and CEO of Park Place International. “So whether their equipment is Sun, Hewlett-Packard, IBM or EMC — the Tier 1 platforms — companies can save up to 50 percent immediately on their existing maintenance contracts. That’s millions of dollars in some cases.”

Smart Business spoke to Kenty about how businesses can reduce IT costs and keep their own valuable employees in the process.

What challenges are businesses facing regarding their IT budgets?

Particularly now, in a downturned economy that we’re all faced with, they’re making very radical cuts to their IT budgets. IT managers and directors and CIOs are faced with decisions about how to best use those resources. So they’ve got to do one of two things: They’ve either got to let people go, which none of them likes to do, or find the savings elsewhere.

The challenge is to preserve the IT staff. If I’m the CIO, I want to get my budget relief elsewhere than from letting people go. Keeping those people gives me continuity into the user community. The people on my team understand my environment better than anyone.

How does working with an ISO affect a company’s IT budget?

An ISO offers companies the opportunity to save money on their hardware support contracts, which allows them to hit their budget goals without having to downsize their staff.

An ISO’s price points are much more competitive than the OEM’s, because its overhead is low. So right off the bat that is going to save them anywhere from 40 to 55 percent off the OEM list. That frees up a lot of spending. When you’ve got a $3 or $4 million hardware maintenance budget, you may be able to get more than $2 million of that back to reallocate and preserve jobs.

Secondly, because ISOs don’t sell hardware, they can allow businesses to continue to run on their existing assets. In some cases, the OEM no longer even supports some of that older architecture. An ISO will support it until a company wants to move it out, with no pressure to replace it and roll it into a new lease or buy new hardware with a three-year warranty. They can really get a lot more life out of their assets.

What is the impact on the business?

There’s mission critical data running through these companies’ data centers, and the people who have been working on it for years are very complementary to their service solutions provider. So companies want the best of both worlds — they want the same level of service that they’re typically getting from the OEM or better, but they also want to hold onto their staff.

An ISO can come in and augment their staff with engineers and a maintenance value proposition. In other words, it can allow them to keep their resources, which makes them more comfortable. The last thing they want to do is use contract resources to support the user community; an ISO partners with them in a nonthreatening way to keep their resources intact and work closely with them to continue the maintenance of their hardware.

In what other ways can an ISO save companies money and time?

An ISO doesn’t necessarily have to be as rigid as an OEM. Billing cycles could be annually, quarterly or monthly. The service-level agreements may vary by platform, focusing on the really mission-critical hardware that’s running the mission-critical applications.

Businesses may want to have 7x24x4 hour support on some applications, with less critical applications running on additional hardware on a next-business-day or a 8x5 level of support. An ISO can give them different options within their environment that makes the most sense for them, versus providing only high-end service across everything in their environment even though they probably don’t need it.

The more vendors you have in your IT environment, the more time you spend managing them. So if you can consolidate a handful or a dozen or 20 vendors into one single point of contact, that gives you a lot of your cycles back to be able to work on other projects and the things that are more important to the business and the user community.

A company may have multiple contractors, multiple OEMs with multiple invoices supporting its entire environment. An ISO can save resources, time and efficiency in the billing departments, because it’s a single point of contact. And that streamlines everything for them from IT management right down through billing.