How to cut 70 percent of your IT budget in one year

78 Comments

I’m not the first to jump on the latest technology. Even after working in high-tech for more than 20 years, I am still a late adopter. But if you can prove to me that a new technology will save me or my company money, I’ll make the switch in an instant.

In 2008 the company I work for, Precise (a developer of application performance management systems), was spun out of its parent company Symantec and into a private company. Suddenly, we had 1,000 customers to support, and a limited IT department. Symantec offered to sell us licenses for SAP and other enterprise software packages that we had been using. But in our new structure, we needed applications that were scaled down and easier to support. We ditched the world of licensed software and annual commitments to large capital expenses on equipment — the traditional way of doing IT — in favor of cloud, SaaS and virtualization.

As a midsize company with more than 200 employees, it was a tectonic shift. But after a year-long migration of our IT infrastructure and applications to the cloud, we shaved more than $2 million, or 70 percent, from our annual IT budget. Here’s how we did it.

Our first priority was to find a solution to support our customers, so we chose Salesforce and NetSuite for the front and back-office solutions. It took a single data analyst a mere five hours to migrate all of our data from SAP to the new systems. For customer support, we chose Drupal and for marketing we chose Marketo — both of which were seamlessly integrated using WebSphere Cast Iron Cloud Integration.

Next up, we had to deal with the Microsoft Exchange servers that we’d inherited from Symantec. Microsoft Exchange can be a bear to support with a slim staff, so we opted for Google Mail instead. The e-mail migration took about five days, and later we also moved from Microsoft SharePoint to Google Sites for collaboration. The cool thing is, employees don’t have to do everything on Google. They can still access their favorite Microsoft Office applications, such as Excel, or use Outlook front-end if they wish.

We also went through a major server virtualization project in engineering — chopping off about 60 percent of our server expenses — and switched to AT&T fiber for networking and adopted VoIP for telephony.

None of the technologies that I’ve mentioned are new or even groundbreaking. But the fact that we could adopt all of them in a short period of time, integrate them using a single data analyst and realize such financial benefits is astounding. Even five years ago, small and midsize companies couldn’t afford state-of-the-art technologies to run their businesses. That’s all changed — and the playing field for IT sophistication has leveled out.

Not only is using newer, Web technologies more affordable, but they’re also more reliable. That’s been the case at Precise, at least. We haven’t had any issues from moving to a SaaS environment. We didn’t spend a bunch of money on hordes of consultants to get everything in place. It really was that simple. I give credit to our former IT director, Sharon Cohen, for choosing the right strategy and the right partners — that’s key.

Our transition to the cloud means that today we spend less time managing all the plumbing and more time working on our own products. We’re even looking at deploying cloud-based systems for R & D. And let’s not forget, we are saving more than $2 million per year. That’s the kind of money companies of our size, which comprise the bulk of the U.S. economy, can really put to good use. We can use those savings to hire strategic new employees or bring new features and services to our customers. For midsize companies, there’s no doubt:  rip out your on-premise software apps, go SaaS and adopt the cloud across the board.

Zohar Gilad is the executive vice president at Precise, a developer of application performance management systems. Before joining Precise, Zohar held senior executive positions at Mercury Interactive, which was acquired by HP in 2006.  

Image courtesy of Flickr user AndyFitz.

78 Comments

Weehooey

It is interesting to see the legacy IT service provider comments. I am a Google Apps Reseller and everyday I see small businesses unshackling themselves from the mystical ‘server’ in the sacred ‘server room’. Zohar’s article may not be detailed analysis but it is typical of SME in North America who are moving to the cloud.

Michael Hoffman, Inc

My issue is not the detailed analysis. My issue is his comment to rip it all out and go cloud across the board. I am onboard with cloud when it makes sense. VMWare has been a life saver for me on several occasions.

Roberto Olivares

Reading the posts of many people here, I have to say I hope I never have to work with most of you commenting on this article.
You’re the kind of workers who want 101 meetings to see if it’ll work, or you’re the kind that starts any conversation with why it can’t work.
Bottom line is Zohar has a real work experience that worked, what do naysayers here have? I didn’t read any specific anecdotes on how it failed for you!

Bud

So he says. The piece is full of vague generalities. He will experience latency and outages relying on the “cloud”.

Jonathan

AFter paying for SAAS for five/ten/fifteen years, will that cost still be cheaper than owning the software and hardware in-house ? Need to incorporate the time value of money as well into this calculation

Joseph Duarte

These type of posts are ver confusing and lack some detail to be objective. Where were the most of the costs realized? where they running a bloated IT Dept? how many IT professionals they let go to realize such high costs? We are a company that is highly virtualized and use most of the MS products mentioned in the post with the exception of CRM or SAP, and I have not been able to find a cloud solution or SaaS ( unless I was going to have to purchase upgrades of all the software) that would save us any meaningful amount of money. I would appreciate more context and information in these type of posts.

Jon

So thanks – now I can spend 40 hours in the next two weeks discussing why we can’t cut 70% of our IT budget. First of all, as a “technical” company it is much easier to pull this off – heck most of you probably wanted Google Apps – for a non-tech based business users do not adapt well so for every $1 you save, you spend $2 in training and lost productivity and increase support requests. Go back to developing please.

John Turnbow

For small companies there is no doubt this can be done. Medium to large size companies that are Global and complex beyond your wildest dreams is not this simple at all.

rick gregory

Which is why he noted ‘for mid-sized companies’. A lot of companies are under a couple thousand employees. Numerically, most are under 500.

Michael Hoffman – you’re right that any such migration needs assessment but it should go both ways. People seem to assume that their current business processes are sacrosanct and any new software needs to be altered to conform. But many times such processes have emerged over time rather than being designed or were designed in reaction to an earlier tool’s capabilities. C level execs really need to ask whether it’s better for the business to adapt their current processes to a tool like Salesforce rather than just assuming that they happen to have stumbled onto the best possible process. If a business does need to do some development around a tool like SF, well, you can spend a lot of development dollars and not spend $2m.

Raul Velazquez

Hi Zohar…You have definitely made lemonade from lemons. It sounds to me like there were two key factors in your success: 1) you had the technical expertise in-house to make this happen-many organizations don’t and a project like this becomes a nightmare, and 2) your applications had high levels of integration-little or no interface development work is for sure the way to go in a compressed time-frame. Now you know what it takes…in case it happens again.

Joseph Chin

Hi Zohar, thanks for your sharing your experience and ideas. You mentioned “We’re even looking at deploying cloud-based systems for R & D.” Can you expand on which aspects of R&D?

I am in R&D and we are not sure we can trust the “cloud” to be secured enough to store our very confidential intellectual properties.

miha

This cloud solution must be called Zohar Gilad cloud solution. It is the human ability that counts, not the tools. Now, if he leaves the company, it will be havoc. Upgrading in sync the software mish-mash is beyond a typical employee skills.

Anonymous Coward

See, that’s where you show that you don’t understand cloud. There’s nothing more to update. You receive most services via the browser, the update happens when the service providers updates his servers.

There is a risk of things breaking. Then you have indeed to call in an expensive consultant and let him do the fix. But this does not happen often, and the work required to fix things is usually cheap, compared to just the rollout of one single rich client (like Outlook) to all workstations of a small company (say 1000 employees distributed in 10 offices) – such an upgrade might be cheap for large companies with a big IT infrastructure, but at that size, maintaining 10-15 people in IT isn’t worth it, so upgrades are painful.

Rich Hersey

They didn’t mention going to Virtual Desktops and a flexible delivery to portals like Thin Clients and Tablets. They could save more than 50% again when they are fully virtual. Why stop at the servers? If you already love the idea of virtual servers then ditch the expense of operating and maintaining PCs too. There aren’t many that can do full Infrastructure as a Service and Platform as a Service, but we do it everyday. When you can push a full virtual desktop to any device, and have all of you Windows applications anywhere, (without citrix) that’s when you’ll start to see some great savings.

Doug Dacre

I agree with some of this. It is good for non critical and small business solutions and could save some money.
I could not recommend to my clients to place their business critical solutions in the cloud as the risk is too great.
1. Have no control over the operation or security of my network.
2. If in dispute, the Service provider holds all the aces and can literally switch off my business.
3. The people who runs these solutions are not beholding to, or responsible to my business which is a concern.

As I said in the beginning Cloud based services are great for non critical services or maybe very small companies but for me, my business critical processes and data need to be on our own network supported by our own staff, and if I then have spare space I might as well host my own non critical too.

O Graham

I’m having a hard time with that “single analyst/5 days” to move from SAP to SFDC. Either (1) your parent spent a LOT of effort on keeping the SAP data clean or (2) you simply did a garbage-to-garbage move. From experience, I’ll vote for #2.

Michael Hoffman, Inc

“For midsize companies, there’s no doubt: rip out your on-premise software apps, go SaaS and adopt the cloud across the board.” Hopefully people put this blog in perspective when they read it. Sounds like a nice success story, but there are an equal number of negative stories. Cloud is not a one-size fit all solution. Careful consideration has to be taken into the decision. While SalesForce does provide a strong service offering, custom development can be very expensive as talent is scarce and comes at a high rate per hour. While the larger enterprise software can cost you more short-term, you may realize long-term savings with it over the cloud. It requires a vetting process like anything. There are many other risks and considerations that go into this decisions. One is PCI compliance with cloud services. Not all cloud services are PCI compliant and this can be a deal-breaker for your decision. Other risks include disaster recovery (ask American Eagle Outfitters about their 8-day outage), service quality, integration, etc.

Ricky Hobson

Hi Zohar, we are looking at a similar project in my company. Can you tell me how strong your SLAs are at managing uptime? The risk of everything being Internet based is a concern of mine.

mapukam

Wow… this sounds as a good marketing article.

…and how ironic is it that there are 4 ad banners for MS Office 365 around the article text!

Michael Hoffman

Shouldn’t be a surprise. If you look at his LinkedIn profile, Zohar has not disclosed the fact that he is a Partner for Cloud Power, LLC.

Praveen Garg

Cloud has brought immense possibilities and this is just the beginning. Thanks for sharing.
Br

Trevor

Can’t agree more than new cloud technologies are a bane to companies with small IT outfit. Wanted to understand how you manage security and confidentiality of data stored on cloud. I’m working for government agency in Singapore and data security always a concern. Thanks.

Steve Cahill

Trevor— take a look at independenceIT.com for a secure complete integrated CloudIT Workspace(TM) solution that is SSAE16 compliant. Hate slaes pitches in this type of format so reach out to me if you want more information…

Misko

I’m really pro-SaaS and Cloud. One thing that I can’t help thinking though when reading this is, how have you implemented control of your data into the SaaS eco system? Do you trust the SaaS vendors completely with your data or do you take measures to keep some level of control of your data? Both in terms of vendor change, vendor bankrupcy, disaster recovery, BI/data mining across your different data sources. Would be interesting to hear your thoughts on this.

W2

:) As someone who sells Microsoft’s software as a service (pay per use per month), I couldn’ resist informing the world: One could do a similar exercise without building a patch work of apps based on multiple platforms. SharePoint, Lync/Skype, Exchange, CRM and a range of open source as well as commercial apps built by ISV’s that seamlessly integrate with Office ARE AVAILABLE today via an ecosystem of hosters worldwide.

Jim Love

We’ve used SugarCRM (1/3 of the cost of SalesForce) with Google Mail and collaboration tools. A similar story — but even lower cost. But it’s not just cost it’s also complexity that gets reduced. Google tools are not only easier to deploy – they are easier to use.

Willie Hamann

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Regards

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deniseterry

@zohargilad love your post! thanks for sharing the message – all SMB owners and enterprise IT managers can benefit by moving IT to the cloud, we’ve realized similar savings using @salesforce @netsuite and our own cloud phone systems @ringcentral – curious if you’ve moved your business phones to the cloud as well? more cost savings to be realized from that by ridding your offices of on-premise phone tech such as PBXs which are archaic and obsolete.

Scott

“It took a single data analyst a mere five hours to migrate all of our data from SAP to the new systems.”

That might be true for DATA TRANSFER ONLY but don’t give me that about converting a whole CRM system from one to another. 5 days? Get real. Most companies take the opportunity when switching to new platforms to change things significantly.

As for the rest of the stuff – this is not practical everywhere. You act as if the switch to Gmail is nothing because “people can still use Outlook.”

Hate to break this to you, but making the change from one system to another is the easy part in any IT environment —- making sure all the users understand what the heck is going on and how to adapt is a whole other story.

Anonymous Coward

So essentially you’re saying that a shift from self-hosted to cloud is requiring a shift in corporate culture, right? I thought this is obvious!

You may have also overlooked the fact that they spent a year not just doing the migration but also using the new systems. They should’ve observed potential problems by now, I think.

AdaptivePortal

Hello Zohar, this is an interesting read that I am sure I will share with some of my prospects! Thank you taking time to share.

Ravi

I noticed that not much information was given about the server virtualization, and I’d be interested in hearing more about that. Thanks

Joe Wood

This is like listening to a conversation at a bar.
Where’s the objective evaluation of functionality? Comparison of products across the market.

If a company is using SharePoint isn’t it easier to migrate to Office365 – which is SharePoint in the cloud? And Exchange in the cloud? Google’s offerings are hardly functionally equivalent.

Cloud Assist

office 365 is also functionally different to current Office experience

David

You are incorrect, Cloud Assist. Office 365 functionality has 905 of the functionality of office on prem, and as far as using exhcnage online, it is nearly 99% equivilant, at a fraction of the cost of on-prem without the need for exchange admins.

George Kwabenah Appiah

Office365 maybe the natural cloud path to someone using SharePoint, but ask yourself what percentage of SharePoint’s and Office’s floated features do you REALLY use? The writer may simply have found Google Sites’s limited features be enough for their use case.

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