Business Solutions / Smart Ways to Cut Costs

BEN WORTHEN,WSJ 02/17/09

If the early returns are any indication, the hot technology for 2009 will be...anything that can save money.

With the recession in full effect, businesses are cutting costs across the board, and information-technology departments are no exception. Eighty-five percent of businesses expect to cut their spending on new tech projects this year, according to Forrester Research Inc., and half of them are planning on spending cuts of more than 15%.




"Just about every company I meet with these days wants to talk about cutting costs," says Bobby Cameron, an analyst at Forrester, which is based in Cambridge, Mass.

But cutting costs doesn't have to mean hacking away at the IT budget and getting by with less in the way of equipment and personnel, an approach that can hobble a business. In some cases, the smartest thing to do is to invest in new, more-efficient systems that will save money over the long haul. Or, it might pay to shift from in-house software to online alternatives, or to use online services to reduce routine expenses like travel or phone calls.

Sometimes the savings are immediate. Sometimes an up-front investment is required. In either case, the right approach can cut costs without damaging a business, and may even improve it.
In With the New

Replacing older, less-efficient IT hardware can cost a lot up front, but can also deliver big savings fairly quickly. Christopher Rence, chief information officer at Minneapolis-based Fair Isaac Corp., which helps businesses determine the credit-worthiness of customers, has roughly cut in half the number of servers the company uses by replacing various older models of the back-office data processors with new, top-of-the-line machines from Hewlett-Packard Co.

Mr. Rence says the project, which began a couple of years ago and is expected to continue for the next year and a half, is paying for itself. Because the new machines are more powerful and more efficient, each one does the work of several of the older models. Reducing the number of servers the company uses has cut his energy bills and the amount of storage space he needs, as well as software costs. He has also been able to reduce support staff by 25% over the past 18 months.
Heading for the Web

Other businesses are saving by using Web-based software instead of programs installed on their computer systems.

Bruce Maas, CIO at the University of Wisconsin-Milwaukee, recently switched the university's 50,000 email and calendar accounts to an online provider, Zimbra, which is owned by Yahoo Inc. Previously, the university relied on a hodgepodge of old systems that required a team of full-time staffers to manage. The online software from Zimbra only requires two people to manage. "That's lean and efficient," says Mr. Maas.

"Cost was a major factor" in the decision to switch, Mr. Maas says, as well as the ability to free up staffers for other projects. The new system also is more functional than the old one. For example, people can add events to one another's calendars. That means, for one thing, that new students' class schedules can be automatically loaded onto their accounts. That kind of help bolsters student retention, Mr. Maas says, as most of those who drop out do so in the first freshman semester, when they are overwhelmed with all the new responsibilities of living on their own.
Help Online

Some companies are turning to online services to cut travel costs. TechInsights is a San Francisco-based division of United Business Media Ltd. that provides customer data to electronics companies. Ideally, TechInsights' sales team would meet prospects face to face. But the company has trimmed much of its field staff and can't afford to send sales reps jetting across the country unless it's to meet with one of the company's biggest customers, says Paul Way, senior vice president of media. "It's not possible in this environment," he says.

Last year, TechInsights decided to put together interactive online seminars for potential customers. The company uses Webcasting software from San Francisco-based ON24 Inc., which charges between $800 and $20,000 per event, depending on the number of attendees and what features a customer chooses. The events Mr. Way conducts typically cost a few thousand dollars.

He says it's hard to compare the effectiveness of in-person meetings with that of the Webcasts, in part because salespeople still usually meet with clients to close deals. But he says it's a much more cost-effective way to introduce prospects to TechInsights' products.

Online services can also be used to cut phone costs. Mentor Graphics Corp., a Wilsonville, Ore., maker of design software, is in the process of switching to Internet phone service from making calls over phone lines. In the past such a move would have been prohibitively expensive, because outfitting a business with handsets capable of receiving and placing calls this way costs as much as $1,000 per phone. But instead, Mentor is using software from Cisco Systems Inc. that allows a personal computer to act as a telephone; workers connect their headsets directly to the computer and dial on the screen.

Every call becomes a local call, meaning the company saves big on its phone bill. The system isn't perfect: Because the calls are competing for space on the network with emails and other digital traffic, the clarity of a call sometimes suffers. "But compare that with the cost and it's worth it," says Ananthan Thandri, Mentor's CIO.
—Mr. Worthen is a staff reporter in The Wall Street Journal's San Francisco bureau.

Write to Ben Worthen at ben.worthen@wsj.com
Printed in The Wall Street Journal, page R5