After Hours

10 ways IT departments waste money

IT is often a popular target for corporate cost-cutting. So the more you can identify and control unnecessary spending, the better you'll be able to fend off the budget axe. Here are a few areas where IT dollars often go to waste.

IT is often a popular target for corporate cost-cutting. So the more you can identify and control unnecessary spending, the better you'll be able to fend off the budget axe. Here are a few areas where IT dollars often go to waste.


Back in the golden days of IT, when companies had plenty of money to throw around, it didn't matter so much if there was a little wastage here and there. Today, however, budgets are tight and there aren't many dollars to spare. That means IT departments need to take a good, hard look at where the money is going and where cuts can be made -- before someone higher up does it for you. In this article, we look at 10 ways you might be letting precious dollars slip right through your fingers. Some of these may seem to be just common sense, but there are organizations out there right now that are wasting money in all these ways.

Note: This article is also available as a PDF download.

1: Wasting energy

Despite some reduction in power costs over the last year, rates appear to be headed back up. The electric bill is still a large expense for most companies -- and the IT department is a big user of energy. You can save more money than you might suspect by adopting some energy-saving policies. Sure, most of the servers need to be accessible all the time. But IT personnel are often careless about leaving workstations running when they aren't doing anything and won't be accessed remotely or substituting the use of a screensaver for turning off the monitor (you should do both). With the power settings available in modern operating systems, there's really no excuse for it, but some IT pros turn off power-saving features in favor of higher performance.

How about the practice of leaving lights on in offices and server rooms when no one is there? Most people don't think about the cost, but it can add up. Using more energy-efficient lighting and buying Energy Star rated equipment can also save big bucks over the long run.

2: Spending too much on mobile technology

Mobile phones and devices are "fun toys" for IT pros, but company-provided equipment and plans may be costing more than necessary. A recent survey showed that only one out of four employees uses 75% or more of the voice minutes that their companies are paying for and almost half (48%) have services on the plan that they never use at all. As this article explains, many companies don't have viable policies regarding mobile device use.

3: Not allowing employees to work from home

Company managers sometimes fail to recognize the significant cost benefits -- to both employer and employee -- of allowing employees to telecommute all or part of the time. One reason they oppose such an arrangement is that they won't have as much control over workers who aren't on site. IT departments sometimes support this position for fear that remote workers will present a security threat. However, with modern technologies such as NAP/NAC and DirectAccess, you can ensure that remote systems connecting to the company LAN are properly configured and protected and that the connections are secure.

Allowing more employees to work from home enables the company to save money on office/parking space and heating/air conditioning. Employees save money on clothes, lunches, and transportation. They also often enjoy work more, so they end up putting in extra hours that raise productivity and benefit the company. Many IT-related jobs, such as those of in-house developers and Web designers, can be done from home.

4: Using consultants when the job could be done by staff

It's a common scenario: Employees have been telling management for months or years that changes need to be made, but they've been ignored. Then the company hires a consultant, who charges tens or even hundreds of thousands of dollars to do a "study" and arrives at the same conclusion, providing the same advice staff members were trying to give away free.

If you have people on staff who have expertise in a particular area and have the time to do a job, it's generally more cost effective to allow them to do it than to bring in an outsider who has to spend many (billable) hours getting up to speed on how your company operates and what its specific needs are.

If you do find that you need to bring in a consultant, check credentials and references carefully. There are many good, hard-working IT consultants. The field is also a great target for rip-off artists who talk over your head about specialized technologies and try to push the latest and greatest on you -- whether you need it or not -- or attempt to sell you on specific products that you may not really need.

5: Hiring full-time employees when contractors would be more cost effective

The flip side of the previous item involves being afraid to use consultants or contractors when it's appropriate. Hiring full-time employees to handle a workload that's likely to be temporary leaves you with idle workers who end up costing you money because there's not enough for them to do to warrant their salaries -- or forcing you to go through the pains (to those employees as well as to the company) of layoffs. In these situations, when you don't have the current manpower or expertise on staff to get the job done, it's often more cost effective to hire independent contractors. Not only can you limit the duration of the commitment, but you don't generally have to pay for fringe benefits, such as insurance and vacation/sick time. You also don't have the administrative overhead of withholding taxes and filing the paperwork that's associated with regular employees.

6: Making unnecessary upgrades

There are good reasons to upgrade your software and/or hardware. When new operating systems or applications provide functionality that your users need or that can help them get their jobs done more easily or more rapidly, it makes sense to upgrade. When existing hardware won't run those programs you need, it may be necessary to buy new computers.

However, some companies follow a set upgrade schedule whereby they replace old systems every X number of years. Or they migrate to the new operating system or major application version X number of months after it's released, or as soon as service pack 1 comes out, or in response to some other arbitrary trigger -- much like the old timer who "takes a bath every Saturday night, whether he needs one or not."

It makes more sense to carefully evaluate how the systems and software are being used and whether there's a real need to upgrade. You can save the cost of new licenses and administrative overhead costs -- and often, make users happier and avoid deployment headaches -- by sticking with what you have now if it's still working fine for your company's purposes.

This applies to servers, too. It's nice to have the latest and greatest running on the most powerful machines, but will it make a real difference in terms of productivity, security, and other important factors or do you just want it so you'll have a new toy to play with?

7: Failing to upgrade old, inefficient equipment

On the other hand, some companies are going overboard when it comes to squeezing every last drop of use out of their current systems. If the computers are getting so old that they regularly break down and require repairs, if your servers go down so often that users of the network can't get their work done or customers can't access your site, if you're putting sensitive data at risk because you're depending on old software that's full of vulnerabilities, if the hardware costs considerably more to operate than more modern machines because it's so energy inefficient, it may be time to think about investing some capital to lower operating costs and save money over the long run.

Remember that neither software nor hardware upgrades have to be an "all or nothing" proposition. Some departments or individuals may need to be upgraded while others can get along for a while longer with what they have. And when you're considering a major upgrade, such as a new OS, it's often smart to roll it out with a pilot group first so you can work out any unanticipated problems before deploying across the entire organization.

8: Overspending on hardware

While buying new hardware can save you money, too much of a good thing can waste it. Some companies are still not utilizing virtualization to the extent that they could to reduce both capital and operating expenditures. Instead of buying multiple mid-priced servers to run Web services, mail services, collaboration and communications services, etc., you may be able to save substantially by purchasing one or two more powerful machines and consolidating servers with virtualization technologies. Not only is the total capital outlay often less, but you reduce the cost of extended warranties and maintenance contracts since they apply to fewer machines, and operating costs are often lower because the total power usage is less.

Another way some companies waste money is by purchasing equipment for a project that requires very intensive computing resources -- but only for a limited time. When the project is over, you're stuck with the expensive equipment. An alternative is to use services such as Amazon's Elastic Compute Cloud (EC2) and similar cloud-based services that allow you to purchase capacity that can quickly scale up or down to fit your needs. Then, at any given time, you're paying only for the resources you actually use.

9: Not using the training budget effectively

Technology is always changing and it's important for IT personnel to stay current, but some departments waste money on training that could be done as effectively for much less. Do employees really need to travel to a distant site for training or can it be done on-site less expensively?  Perhaps instead of sending several employees, one can attend and then come back and share what he/she learned with the others. Or the same training may be available on DVD or through live online instruction at a fraction of the cost.

Is the department paying for certifications that may not be necessary? Certification provides assurance of a certain level of knowledge and in some cases, having certified employees on staff enhances the company's reputation or allows it to participate in vendor partner programs. But some IT professionals collect multiple certifications -- at company expense -- that may not benefit the company at all (although they may benefit the employee in looking for a new job).

Ongoing training is important, and having well-trained personnel can save a company money in the long run. But when budgets are tight, it's also important to get the most for every training dollar and cut out the waste.

10: Wasting money on travel expenses

Training isn't the only reason employees travel on the company dime. Members of the IT department may be called upon to attend meetings at company headquarters or give presentations at another branch office or go to a different location to help set up equipment or troubleshoot software problems. In a tight economy, it's smart to examine whether this things can be done via online meetings or through remote control software.

Sometimes, though, travel can't be avoided. In those cases, you can still save money by staying in more reasonably priced hotels, putting a cap on meals reimbursements or instituting a per diem, and even taking shuttles instead of cabs for small savings that add up.

When traveling only a few hundred miles, consider driving instead of flying. Given the hassle factor at airports today, it may not take much longer and can be a more pleasant experience, and the savings really accrue when two or more people travel together by car instead of plane.


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About

Debra Littlejohn Shinder, MCSE, MVP is a technology consultant, trainer, and writer who has authored a number of books on computer operating systems, networking, and security. Deb is a tech editor, developmental editor, and contributor to over 20 add...

23 comments
zakcando
zakcando

In every company I've worked at IT departments create fear and demand more power and money to subside it. This almost always destroys the productivity of software development teams. They can't use the software they need and the rules they have to go through eliminate there competitive edge. SO then we outsource our development to other countries that don't inflict this crap on themselves. When will we learn! The hell with IT! Really, stop killing our edge.

Gis Bun
Gis Bun

I worked at one place at a privately owned company where they spent $500,000 on a project - just to cancel it. On the flip side, the place after that didn't spend much unless they had to. The majority of PCs were 5+ years old. They only recently bought a new batch. Just to get rid of some systems running Windows 98 [!!!!] that were 10+ years old.

dbecker
dbecker

Bad / inappropriate management within IT is the primary cause for a waste of money. The bases for the bad / inappropriate management are these: 1) Being ill suited for a management job in IT in the first place. This can be subdivided into not inheriting the appropriate talents, lack of education and lack of experience. This triumvirate of lacking qualifications is one horseman short of the apocalypse. 2) Lust. Managers not only get greedy, but many of them are narcissistic and want to prove their political worth -- with the attendant catastrophic results of not just wasting resources but saddling IT with deficiencies long after they are gone [our IT Director is retiring; we were tempted to send him an e-mail congratulating him on making IT what it is today and making IT a family (with the two top managers married to each other controlling 85%+ of the people in IT)]. 3) Neglect. Procrastination is their sin, it brings us endless sorrow; in fact they will stop doing it -- it will end tomorrow. Things undone will undo IT. 4) Playing favorites. Money will be spent on pet projects for the pets of management, to the obvious detriment of everyone else. 5) Lack of a viable framework: "We're fine -- we don't need ITIL -- everything has always worked" and the (ill paid, ill treated) people will take care of things when we have a disaster (like we did last week, when half the computer room failed due to the new air conditioner tripping a circuit breaker because it wasn't wired to the panels right for balancing power -- we came in, fixed the problem and went our way without management ever showing a pinky). 6. Lack of process. Sure, management says that we have project management, but at the same time assure us that "IT doesn't manage projects very well". Not my fault -- I brought the project management course to HR and they taught it for awhile, but most of IT never heard of it. Flying by the seat of your pants is the rule of the day because there is never time to do anything right, just to do it over. By the way, the HR person bringing my project management expertise to the agency has just retired -- effectively killing any further progress of IT. 7) Lack of viable priorities. No money but management brags about how they installed a new security system [with no RFP, maintenance or requirements, for that matter] and moved over to Exchange with NO ROI at a time when our agency was over budget to the tune of the amount of the cost of the projects -- which either should never have been done or could have been seriously postponed. 8) Arrogance. There is nothing like having bragging rights, even when it has cost your organization dearly. 9) Mental illness, alcoholism and drug abuse. Distorted perceptions of management with these defugalties is particularly insidious, especially when they seem so reasonable in the Folie ? deux of nutty managers. [Solution: Either fire them or put them in rehab -- we had to do that here with a psychoaffective alcoholic stalker production services manager!] 10) Cooking the books. Sure, go ahead and drain away vital resources from your core systems to fund your pet projects, why don't you? You can cover it up and no one but staff will know. Wait for the failure of your most essential systems and try to get your staff to recover with no resources. 11) Silence all critics. They may have something to say about your rotten evil practices in management to the destruction of not just IT, but the whole organization. And for good measure, make issues undiscussible by having them become an open secret that everyone knows about, but irrelevant because of the acceptance of the obvious cognitive dissonance. Some of you think this is a big joke. Wait until you live it.

jreddy
jreddy

As a developer, I see a lot of companies increasing their work force with below-average developers to "keep up with" the amount of work stemming from a successful project. Often I see 6+ member teams supporting software efforts that should be manageable by 2 people and an occasional consultant.

rbmfernandez
rbmfernandez

i'll probably agree on the first item. but sometimes restarting workstations produces some problems. That's why some companies and IT departments, just let their pc's on for the whole night (or probably over the weekend) to be able to continue their work the next day or week. When wasting money will be the issue, fixing some problems resulted from restarting the pc will significantly waste company's money, and user's time.

alewisa
alewisa

Sorry, not the best article. 1. Energy. The amount of energy consumed by the IT dept is likley to be insignificant compared to a company as whole. Turning off the lights in the server room.. yeah, ok... thats a huge saving. Quite apart, energy conservation should be a business policy, not an IT owned policy. This is not an example of how IT wastes money. 2. Mobile technology... Again, the section concentrates an a business issue. So abrely 25% of a companies workforce use >75% of their minutes. And this is what, exactly, to do with IT? Nothing. All IT can do is suggest (and move to, if they have in-house owenership of the service) a more suitable policy. Business issue. 3. Hardly an example of IT wasting money again!. Its a business decision to allow remote working, not an IT decision. And the examples of "savings" are tenous, to say the least. Unless one rents parking space, there is no parking space saving. Cost savings on office space? Only if one is in leased accomodation and has the opportunity to renegotiate. But long term rentals tend to offer better savings over short term savings, in which case the costs and expenses of remote access can wipe out the alleged savings. Employees saving on the costs of clothing and eating - why, do home workers work naked and starve??? Hardly an example of IT wasting money. 4 + 5 Agreed. Most consultants talk to IT people, then tell plagarise this back to the business. Because the suggestions have come from an expensive outsider, they are (in the Dilbertesue minds of senior management) politically acceptable. Oh, and of course an expensive consultant knows far more than the comparitively lower paid in-house personnel, so therefore must be "better". And this is an afflcition often shared by senior IT managers.... which is very poor leadership. And of course, hiring short-term contractors is sensible, provided that the contract doesn't extend [too much]. Otherwise one can spend more on a 6-9 month contractor than the cost and overhead of a FTE for a year. The dept would have been better advised hiring a perm employee on a 1year fixed contract (common practice in the UK). 6+7 is more sensible budget management than cost savings, but I agree with the sentiments; especially of the CAPEX cost of new equipment can be offset, and the OPEX costs shows savings over the old euipment, its a double win. 8. The example isn't so much "overspending" as over-specifying. Once IT have agreed the spec/model/whatever, leave purchasing to a commercial manager who is skilled at beating down the price with vendors (with IT kept in the loop to ensure a supplier doesnt agree to a price drop by means of a drop in support, or similar). If high-grade equipment is needed for a short term requirement, then business needs to be aware of this from the outset, and IT should have prepared some options in advance, either alternatives or post-requirement deployment (such as upgrading older servers) 9. What training budget!!! need one say more :-) No, imho probably the best section in the article. Fight tooth and nail to retain a training budget, as it training really does show a commitment to staff and reaps rewards in loyalty and productivity. 10. Again, really a business policy, not just IT specific. Nice try though.

jck
jck

Namely: management. Most senior, experienced, lead department people can perform the project planning duties of a low to mid-level manager. And, your upper-end management and the finance/budget folks can flush out operational costs. Lower and middle management really isn't necessary, and is often high-cost because of bonuses and additional perks/benefits. Fire a manager. Employ 3 more workers who will get more work done.

csmith.kaze
csmith.kaze

Especially on webservers and even file servers. I know that not all programs can be ported over, but many tasks can. and for much cheaper, even if you go with a support contract.

BarryRobbins76
BarryRobbins76

Allowing computers to go into standby / hibernate creates a hassle for logging in remotely and remote administration.

themikeman
themikeman

You didn't happen to work for a HR Software company in Canada did you? Because this is eerily familiar...

Shellbot
Shellbot

hey..been ages..sent a mail to your yahoo..you stil using that one??

Fairbs
Fairbs

1. Does everyone need the entire Office Suite? How about Google docs for non power users. 2. Consolidate servers through virtualization. As mentioned in the article, you should be doing this by now. 3. Phase out CRT's and replace w/ LCD monitors. Probably most have already done this. 4. Your largest environmental impact as a business is your employees commute. So if you are an environmentally responsible company, increase telecommuting.

brian
brian

As I concurrently support windows and linux web servers, there can be a number of items which can interchange without issue. The biggest roadblocks are .NET and rewrite rules. .NET has no equivalent in the Linux world, so you're looking at major rewrites. The rules for rewrites are also prone to error in execution on the Linux side. (The other direction may also be true.) The dependencies created may not match closely with what you want to implement w/ UNIX. The good news is that you could put the entire site onto a linux box and test it well before allowing it into production. About Training Budget - 1) I have *no budget* available for training, although we desperately need some training. 2) Even when flush with cash, I've had my training/travel cancelled on me, so I could help with projects - TWICE. I've done more training out of my own pocket than the compny I am in now.

backcountry33
backcountry33

Agreed - some computers probably should never be shut down. People that need remote access to their machines are probably not ideal candidates, however in a given organization there are generally a ton of machines that are only ever used from 9-5. You can use a program like SetPower to schedule when they are allowed to fall asleep and when they will be forced to remain awake. You can also wake them at a predicable time for pushing updates etc.

dbecker
dbecker

Here is an excerpt from our retiring IT Director: o We have gone from thousands of bytes, megabytes, gigabytes, terabytes, nanobytes and more in our storage and memory capacity. A nanobyte? A billionth of a byte? Not in this universe unless you employ some string theory not yet explored.... There was much more embarassing stuff like how, when he started, computers were as big as buildings -- totally untrue, for him anyway. Maybe with the acres of tape drives... maybe. And then there were his "bragging rights" about the [and he had the nerve to use the vendor's name] security system and converting over to Exchange [with no ROI at all, just millions of dollars in expanded costs]. His original e-mail was classic where he called dealing with IT "crap". It was the first time I'd ever seen the word in a retirement announcement. We all give him credit, though: He was the one who presided over the alcoholic schizoaffective manager who was stalking the wife of a sheriff's deputy. We should hearken back to the days I talked with one of the associates of an IT consultancy who admitted that all of the corporate officers were heavy into snorting cocaine. Now it may be that a few of you have missed the best of what IT management has to offer, but for the most part, those protesting that the material I post is inappropriate and unreal, are probably just clueless to what is going on around them. It's time to read the newspapers, for heaven's sake and see the facts about all those public failed IT initiatives. I myself find it all a source of private amusement, constantly confirming the foolishness of it all. I think it hilarious. It's one of the reasons for getting up and going to work! I can't wait to find out the what happens next in the continuing saga of the soap opera, "As the computers turn". However, on the serious side, all of these problems exist. The good folks here at Techrepublic.com are doing a good work, but it may very well be wasted. If management does not make some serious changes, IT is pretty much doomed. The final destination is to be another utility like the telephone and be wiped entirely. In fact, that's what I think should happen, but let the management go first -- us techs will keep everything running until they turn off the lights. As for all those MBAs that are so good at running companies, one only need mention Enron.

s31064
s31064

If either of you thinks this is reality, it's time to find a new job and move on before you destroy yourselves. That is, unless you fall into number 12, which is dissident IT workers that never agree with management because they (the workers) know so much more than anybody else, especially those d@mn MBAs that think they know how to run a company...

jck
jck

yeah, been ages...broke my neck...had spinal surgery...have 2 titanium rods in there. You've heard of the 6 million dollar man? I have the $122,000 neck! :^0 You have a reply to your email now :)

Fairbs
Fairbs

Allow employees some of their work week to train. 2-4 hours maybe? You could also make it like a class where a small group train on a specific topic w/ a reading assignment each week and a meeting to discuss what was covered and to improve comprehension. No final please.

lhaustein
lhaustein

Sounds like the problem is that it was written in .NET in the first place. There are many other options in the open source world that will do the same thing as .NET. Then you won't be tied to one OS... Microsoft is a big reason why IT does too much useless upgrading.

dbecker
dbecker

Thus far this year, I've spent over $2,000 on books and as much for software to train myself in the wonders of .net, LINQ and Visual Studio 2008 C#. It is well worth the investment. At the same time, I've also invested my own time and money learning PHP5 rather thoroughly, although there's a ways to go there. Fortunately, with my background in DB2 and operating systems, SQL is pretty much a snap. Don't whine about investing your own money in training. It's quite worth it. And if you ever move along, just remember that currently, premiere consultants, particularly those knowledgeable in C# and .NET, have been making $135 per hour. And yes, MONO is a not quite full implementation of .NET. Go for it.

michaelsaltmarsh
michaelsaltmarsh

Oh come on, it was much more a cynical view point then anything. Or at least thats the way i took it, then i decided that my condescending nature would be best suited to leave a reply that not only adds but takes a shot at the ridiculous nature of this "green" movement. I don't know maybe i do hate my job, maybe i will destroy myself, maybe, maybe...... ehh going to smoke at least i can still legally destroy myself that way. :P he he he doin' it for tha lulz ^_^