Cost Saving for IT Infrastructure Management Page 1 of 3

Cost Saving for IT Infrastructure Management

Rama Murthy Prabhala and Rahul M. Joshi

January 8, 2010 (CIO) Much has been said about best practices in IT management to tide over the
economic downturn. Under ever-increasing pressure, many CIOs are now looking at IT Infrastructure
management as an effective means to drive business transformation. While most organizations are
keen to join in, there are some strategies that may be employed to get quick wins.
The sheer pace of change in the technology space has allowed organizations to outsource key activities
that would have otherwise consumed crucial internal resources. Management of IT Infrastructure is one
of the areas that can be outsourced to a third party. Studies indicate that up to 80 to 85 percent of
management activities can be done remotely thus offering an opportunity to decrease costs*.
* Source: "Remote Infrastructure
Management Services: Igniting India's
leadership", NASSCOM-McKinsey
report 2008
In the past, IT Infrastructure
management usually consisted of
asset-based transformations. However,
with the emergence of solutions such
as cloud computing, SaaS and utility
computing models, enterprises can
now offload their IT assets by
subscribing to IT service components
without having to actually acquire
hardware. This has proven to be useful
especially at a time when almost every
other day a new technological acronym
is born.
CIO Strategies for Improving
Productivity and Rationalizing Costs
As hard pressed CIOs continue to
focus on boosting productivity while
reducing costs, large projects may not
be financially viable at this time. However, all is not lost since there are proven strategies available for
CIOs to address the challenge of supporting the business with a reduced IT spend. We recommend a
three-phased approach to tackle the issue of cost optimization, innovation, and business-IT alignment to
achieve the overarching objective of a lean and efficient IT driving business growth.
Before implementing these strategies, CIOs need to do a robust risk assessment and benefit analysis to
determine how these will impact the organization. Rather than being swayed by the hype surrounding
some of these strategies, they need to gather information and evaluate the impact carefully.
Many of these strategies assume that the organizations have capabilities to undertake such
transformation programs. However, it is necessary that CIOs do a realistic capability analysis and if
required, moderate the goals. CIOs will need to prepare a detailed roadmap on how to acquire the
required capabilities. A prudent selection of partners and trusted vendors can significantly hasten the
process of acquiring the capability.
A critical element is to balance tactical objectives with long-term strategic objectives. While the downturn
has forced many CIOs to cut deeply into the organization costs to gain tactical advantage, it is also
imperative that they not compromise on the long-term strategies and put the organization at risk during
the upturn.
We believe that by following this three step approach where each step builds on the other, CIOs can
deliver the promised benefits to the enterprise. CIOs need to consider realistic benefits that can be
achieved through the strategies.
Short Term -- Cleanup
Defer discretionary spending - This is relatively easy to achieve, but care must be taken in identifying the
projects that are to be shelved. While application upgrade projects are underway, CIOs should scrutinize
the benefits of these projects and defer implementation of these upgrades if they are not critical for

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business. CIOs should review all projects and prioritize them depending on the cost-benefit outcomes. It
is also recommended that future direction and growth be accounted for while doing the rationalization
exercise.
Decommission little or never used applications - CIOs should consider rationalization of applications as a
strategy for reducing costs of IT operations. Elimination of redundant applications is a must in cleaning up
the application inventory and reducing support costs. Such a move is an extremely useful lever while
dealing with organizations that have grown through M&A or that are organized based on lines of
business.
Application portfolio based view of support costs - CIOs need to re-evaluate the cost of managing
application portfolios and adjust the service levels based on the utility and criticality of these portfolios in
consultation with business partners. One approach for achieving this is to build an inventory of
applications, classify the applications maintenance and support needs based on core, sunset and new
generation applications and then build appropriate support models with relevant service levels. This
allows IT to reduce service levels of up to 30 to 40 percent of application portfolios leading up to 20
percent reduction in costs.
Medium Term -- Reduce Complexity
Consolidate support, platforms and technologies - After elimination of redundant applications, it is prudent
to consolidate the application infrastructure and support. Strategies for consolidation could include:
• Shared Services - Setting up a shared services model for application support and maintenance
activities: Implementation of a mature shared services model leads to support staff rationalization that
can help in releasing the work force and re-deploying them to strategic projects. Retraining the support
staff will help increase productivity and application per person ratio.
• Infrastructure consolidation - Consolidation of application infrastructure and leveraging virtualization
wherever appropriate helps drive down data center costs.
• Enterprise Architecture consolidation - CIOs need to use this opportunity to assess the application
platforms and build long-term and near-term strategies to consolidate and guide the organization toward
next generation architecture. This will enable CIOs to be ready for the upturn and position them to
support fast changing business demands.
• Consolidation of application support - After the standardization of processes, IT managers should look
at consolidation of support and maintenance both within and across application portfolios. We have
observed savings of 5 to 10 percent in overhead as well as operational costs due to consolidation.
Why not open source? - Open source products can be considered a feasible alternative to proprietary
products. There are positives and negatives to this, based on the criticality of the use for which an open
source product is being implemented. The adoption of open source products is recommended after taking
into consideration the maturity of the product and its supportability. Lack of available support is a major
hindrance to adoption. CIOs need to make a decision on the correct time to implement these products in
their environment. Based on the available data, niche implementation of open source in the Web and
middleware platforms has delivered more than 25% reduction in licensing costs for customers.
Standardize IT processes and operations - CIOs can bring in service management best practices; apply
six sigma and lean principles to streamline the process of maintenance and support. Typically,
organizations may achieve ˜ 5 -10% savings in operational costs due to standardization of processes
through improved productivity. These savings vary depending on the nature of the operations.
Automate Manual IT tasks - CIOs need to automate routine activities to reduce manual effort and achieve
higher process maturity in operations. Some activities that are natural candidates for automation include
reporting, weekly and daily application check, alert monitoring, problem identification etc. We have seen
organizations achieve ˜ 10 to 20 percent savings due to automation of processes. Companies must
investigate the cost benefits of implementing Run Book Automation (RBA) solutions for operations. RBA
tools have matured over the past couple of years and have helped organizations realize substantial
savings on operational costs. A task based automation approach could lead to benefits of up to 8-10 %
within the first three months. We have seen this consistently work well across 40 varied IT environments
with varying degrees of maturity.
Process control - There is a need to evaluate the change and release management processes of
applications, infrastructure, etc. CIOs need to implement stringent change control mechanisms to curb
unauthorized change, which lead to unavailability of business applications and productivity loss. IT
organizations could save ˜ 5 -8% in unplanned costs and better compliance to federal regulations and de-
risk the IT operations by achieving process control.
Long Term -- Business Innovation
Assess alternate delivery models - CIOs need to consider alternate delivery models to get faster cost
benefits. Some of the delivery models that can be successfully deployed include:
• Transaction-based pricing models for support and maintenance.
• Pay-as-you-go models.
• Catalog-based pricing models.
• Unit of Work (UoW)-based pricing models have delivered an immediate cost benefit of up to 15 percent
reduction in OPEX to customers who moved from traditional time and materials (T&M) and fixed price
(FP) model.
• Managed Application Operations Models.
• Cloud computing: Source e-mail and office productivity applications through the cloud.

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The above strategies have been used well as transformation levers in banking and healthcare verticals.
Our experience suggests that significant upfront benefits can be achieved by choosing strategies that can
be implemented without significant change management to begin with. For example, a leading
investment bank saw a 15 to 20 percent reduction in TCO due to consolidation of service desk and
movement from a T&M to a UoW model. The second phase is a strategic initiative that could involve
multiple levers like automation, consolidation of technology and standardization of processes.
In the case of healthcare customers, rationalization of technology and software licenses lead to a
reduction of ˜ 5 percent TCO to the IT organization. Platform consolidation and automation can lead to a
further savings of more than 10 percent in the next six months.
While the above mentioned strategies are capable of achieving significant cost savings in the short and
medium term, it is important to have frameworks in place to sustain these activities. Many organizations
tend to look for immediate returns through IT transformation -- however, most are unaware of the level of
effort and investment that is required to sustain the rewards. As is evident from Figure 1, most of the
strategies mentioned above will plateau after sometime.
A key point to remember is to document the business value of the strategies mentioned above. While
some strategies may bring immediate cost savings, others may not -- but they will be crucial
nevertheless. For example, building a framework around Configuration Management Database (CMDB)
may require a significant one time effort -- but the rewards are visible when a platform migration is
underway.
In conclusion, it is important that in these trying economic conditions CIOs utilize all available strategies
and avenues to deliver more with less. They must use this opportunity to build a strong process and
technology foundation to prepare their organization for the next upturn.
About the authors
Rama Murthy Prabhala is a Delivery Manager with Infosys Technologies Limited. He specializes in
program management of large Application and Infrastructure programs with focus on Banking and Capital
markets and Manufacturing sectors.
Rahul M. Joshi is a Principal Consultant with Infosys Technologies. He specializes in IT strategy and
provides consulting in the area of complex IT transformation programs. He is responsible for IT Service
Strategy, Tools, Solutions and Reuse programs in Infrastructure Management Services.

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