IT's Biggest Money Wasters

Even in these lean times, where tech budgets are trimmed to the bone, money gets wasted. Companies routinely overspend on software licenses and service-level agreements. It's possible to have too much bandwidth at your disposal and to store too much email on company servers, not to mention the billions of dollars still wasted on paper and ink. Then there's the inevitable project from hell that ends up swirling down the toilet, dragging your precious IT resources behind it.

It doesn't have to be this way. Though there's no one-click solution to any of these money wasters, there are ways you can stanch the flow of dollars and use it on the items that will make your IT organization shine. Here are the secrets.

[ Find out how to assemble your IT special ops group to tackle the toughest tech challenges -- see "A-Teams of IT: How to build your crack strike force" | Get sage advice on IT careers and management from Bob Lewis in InfoWorld's Advice Line newsletter. ]

IT's biggest money waster No. 1: Dusty software licenses

Collectively, U.S. companies are paying billions for shelfware -- whether it's software that was never adopted or for employees they no longer have, and often at prices that are higher than what is actually needed. A 2010 IDC survey of midsize and large businesses found that well over half of enterprise applications are underutilized, with anywhere from 25 percent to more than 75 percent of licenses paid for but unused, notes IDC analyst Amy Konar.

"Organizations typically use less than 50 percent of an installed ERP system and are paying significant licensing and maintenance fees for modules and functionality that are not providing value to the business," says Kathryn Douglass, managing partner of IT consultants WillowTree Advisors. "They need to review their named-user licenses and renegotiate agreements to remove unused or duplicate users from licenses. The difference between a 2,000-named-user license and a 1,500-named-user license can easily be $500,000."

Small and midsized businesses may be able to get away with using an Excel spreadsheet and their accounts payable records to true-up their software needs. But larger, more complex operations need enterprise-level software that can track software assets, gauge their use, and optimize the licenses accordingly, says Steve Schmidt, vice president of product management for Flexera Software, maker of application usage management solutions.

Every company should start by collecting information on the software they are paying for and what they actually use, says Schmidt. For many companies, that tends to be a one-time event instead of a continual process. Asset tracking and license optimization need to account for such details as downgrade rights and second-machine use rights. Global companies may have concurrent agreements that allow them to use one license 24/7, shifting from one physical location to another as the day progresses. Even users of cloud apps need to closely monitor their usage levels -- which can be hard to do manually.

"You want to be able to combine that information in an intelligent and automated way so that you can make good decisions about optimizing," Schmidt says.

For large enterprises, the amount of money left on the table is far from trivial. Procter & Gamble used Flexera's FlexNet Manager Suite to eliminate unnecessary licenses for its Oracle and SAP products, trimming more than $30 million from its annual software budget.

The other option: Ditch those draconian licensing agreements and go open source, says David Wood, CTO for the Jun Group, which distributes video content for companies like Nike, Wal-Mart, and Coca-Cola. Open source software can't solve every problem, but it's come a long way in the past 10 years.

"Outside of certification-driven fields like finance, health care, and the military, most Oracle (and former Sun) customers are overpaying massively for Unix and relational database capacity and features that are never used," says Wood. "The software licenses run to the millions, and once they have built on this foundation, the victims can never escape. The rationale was that you don't entrust a big business infrastructure to open source hippies. It was wrong 10 years ago and it's ludicrous today. Are Google or Facebook running their websites on Solaris or Oracle? I don't think so."

IT's biggest money waster No. 2: The paper chase

Remember the "paperless office"? Turns out it was just another fantasy, kind of like "clean" coal or change we can believe in.

Despite the influx of digital technology over the past 30 years, U.S. office workers still consume an average of 10,000 pages per person every year -- about $80 worth -- according to the Lawrence Berkeley National Laboratory. Nearly half of that paper ends up as trash before the day is out.

U.S. corporations spend $120 billion per year on paper forms alone, notes a Xerox study. But the costs don't end at paper. Ounce for ounce, the ink inside a typical printer cartridge is 15 times more expensive than Dom Perignon champagne, according to Chronicle Research. Filing that paper, copying it, mailing it, storing it, and finding it again can add up to more than 30 times the original cost of printing, per a 2005 study by the Minnesota Office of Environmental Assistance.

Have we convinced you yet?

A paperless office is still not very likely. But a less-paper office is entirely doable. Step one: Get rid of forms that need to be processed by hand, says Paula Selvidge, VP of user experience at PerfectForms, a business process automation company

Next page: Out-of-control email

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