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It’s Time to Take a New Look at Traditional IT Spending

Category: Blog

There’s no time like the present to revisit your IT spending practices. I cringe every time I hear someone say, “Well, nobody ever got fired for buying IBM.” It’s not that I have anything against IBM, but playing it safe and sticking with the status quo also can be the fastest way to relinquish hard-won IT flexibility and business agility.

Today, there are lots of well-respected big brands to choose from and new ones are appearing all the time. What hasn’t changed enough is moving beyond traditional budgetary practices. IT spending still tends to lean toward capital equipment purchases, even though there are sound strategies for diverting that spend on innovations while saving on capital and operational IT expenditures.

Making a much-needed change in spending practices can be an eye-opening and liberating experience. An alternative approach starts with classifying equipment based on a series of attributes that impact purchasing decisions, including, but not limited to:

  • Cost
  • IT asset lifecycle management
  • Brand recognition
  • Reliable performance
  • Technical innovation
  • Quality of service
  • Flexible and responsive support

IT lifecycle management should be a crucial factor in any budget analysis, as not all gear should be treated equally. After all, every environment contains a mix of core applications and equipment. Some are intended to drive innovation and agility while others are stable, reliable cogs that keep your network and data center running, as expected. By extending the useful life of those highly functional workhorses, you have more to invest in innovation while reaping big cost savings on equipment purchases and maintenance.

Two excellent strategies exist for extending equipment lifecycles: Third-Party Maintenance (TPM) and used hardware. Gartner has followed both sectors for years. Recently, the industry watcher updated foundational research on “Used-Hardware Resellers Offer Hardware and Support Cost Savings.” According to Gartner, “the purchase of used hardware gives enterprises the ability to stretch the functional life of IT assets…Depending on the complexity, location, age and product density of the equipment on order, savings can be 50% to 70% off the discounted price of new, functionally equivalent hardware.”

The use of TPM for some, but not all, equipment also is addressed, with typical cost savings of 50% to 60% on OEM hardware contracts. Gartner recommends companies “use support from used-hardware resellers and TPM providers on hardware in any of the following categories: noncritical, post-warranty, end-of-sale, or end-of-support hardware.” It is encouraged to “use support from used-hardware resellers and TPM providers when flexible terms and conditions are required”; pilots are recommended to “test the vendor’s support on commodity or nonproduction hardware before using the provider more broadly in a data center or network environment.”

At the last Gartner IT Financial, Procurement & Asset Management (ITFiPAM) Summit, I delivered a presentation on IT asset management called “How to Stay on Budget and Innovate.” In addressing this topic, I shared the story of a $6B U.S.-based retail store chain with 5,300 employees. Following the completion of a $28 million upgrade to 4,000 stores, the company sought a similar upgrade for 1,000 stores in Canada. By taking an alternative path featuring used hardware and independent support services, both hardware acquisition and maintenance costs were reduced, resulting in $4.5M in capex savings and $1.75M per year in opex, or $9.75M over three years. It’s hard to overlook savings like this.

When it comes to maximizing innovation while staying on budget, companies should seek an alternative path that takes them on a shortcut to substantial cost savings and smarter IT decisions. Let’s face it, the ability to make better hardware acquisition and support choices is the best way to address your never-ending wish list, which typically includes future-proofing your environment, consolidating global support contracts, reducing unnecessary IT spending and improving budget allocation to business innovation.

By doing so, you can firmly resolve to get the most from your annual IT spend while propelling your business forward.


Gartner Used-Hardware Resellers Offer Hardware and Support Cost Savings, Eric Goodness, Christine Tenneson, published: 5 February 2015, refreshed: 21 October 2016.

 

 

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