The Other Three Rs

Computerworld - As budgeting season approaches, all IT managers are looking for ways to reduce costs. While your supplier portfolio is an excellent place to start, don't beat every last cent out of your vendors until you consider the three Rs of supplier-related cost reduction: repetition, redundancy and rigor.
Repetition: Look for costs that recur automatically. Review monthly bills to make sure you are using the product or service for which you are receiving a bill. While the individual amounts may seem relatively small, removing these errors will generate savings each month for years. For example, telecommunications bills (which are often more than 100 pages long) may contain charges for unused lines or services.
Your asset management system may reveal other savings opportunities. Maintenance charges on retired hardware can continue long after the box has become a boat anchor. One of my firm's clients found that it was still paying several million dollars for annual hardware maintenance on point-of-sale equipment that had been retired for several years.
Redundancy: Eliminate redundant contracts and suppliers. It takes time and money to manage each one. Consolidation will reduce overhead and aggravation.
Highly decentralized corporations need to closely examine their divisional contracts. Often, divisions hold contracts with the same suppliers. Replace division-level agreements with a corporatewide contract.
Reduce the number of buyers in your company, since each buyer represents significant overhead. Overhead includes the time it takes to coordinate with other buyers, as well as the time required to become familiar with complex contracts, financial models and the IT architecture. Having fewer buyers not only reduces overhead, but it also minimizes redundant buying decisions. The vice president of procurement at a major financial services company said it well: "I am astounded by the number of manager-level employees who can obligate a $17 billion corporation."
Rigor: Rigor makes savings reliable and repeatable. Try to do the following regularly:
• Consolidate your technology purchases to obtain lower unit costs and ensure consistent pricing.
• Make sure your buying process contains checkpoints for both architectural and financial reviews.
• Before negotiating with suppliers, do your homework to anticipate their wants and needs. One well-known desktop lessor offered discounted lease rates to a client in anticipation that it would make additional profits from its new asset management service. And it's common for vendors, when entering a new vertical market, to offer low prices to the first few customers if they agree to serve as references.
• Demand business cases from the executive sponsor for all projects - and kill projects