IT spending smarts: strategies for paring costs and risks.

• Author: Carcone, John
• Position: Information technology investment

Today's business realities put tremendous pressure upon CIOs and CFOs to make optimal technology investment decisions. Although hardware prices continue to fall, some industry estimates suggest that, on average, organizations today spend more than 50 percent of their annual capital budget on technology investments. Other estimates show that of the total information technology (IT) budget, as much as 80 percent is spent on managing the current IT environment, leaving only 20 percent for new applications and systems.

With so much of the capital budget at stake, and so narrow a margin for error in making new technology investments, it's no wonder finance and IT executives are looking for new strategies to reduce the cost and risk of technology spending. Yet, too often, cost-control efforts focus on reducing initial acquisition costs, rather than the total cost of ownership over each asset's useful life. Much greater cost savings can be achieved through strategic management, over time, of the entire IT asset portfolio, including not only hardware, but also software and maintenance.

Here are four strategies for making smarter technology investments, using a portfolio management approach.

Strategy 1: Assemble a Detailed, Holistic View. In order to assemble a holistic view of your overall IT asset portfolio and the total cost of ownership over the technology's lifecycle, you must first establish a baseline of the current environment for all systems, software and maintenance. Creating a baseline involves a combination of steps:

* Verify current asset information through non-intrusive, automated inventory audit and software mapping tools and a physical walkthrough of the company's office(s) and data center(s).

* Review purchase or lease records to determine the age and life expectancy of each asset.

* Review maintenance contracts to ensure existing assets are appropriately covered and maintenance is not being paid on obsolete assets.

* Inventory and map current applications to the business processes they support and to the systems supporting them, all the way down to detailed configurations and dependencies. This provides the information necessary to determine the critical nature of different elements of the infrastructure and, thus, the business impact of planned or potential consolidations and upgrades to the environment. It also enables validation of business continuity plans.

* Gather all hardware, software, and maintenance information in a...