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Businesses Save Money with New Technologies and Reinvest in Other Areas

Cloud computing, managed networking and managed print services help companies cut costs.

Apigee has a simple yet effective strategy to provide state-of-the-art technology to its employees without breaking the budget: Implement an IT project that saves money, and use the savings to pay for other technology needs.

Last year, the Silicon Valley software startup got rid of its data center and turned to a public cloud provider for its server and storage needs. With the money saved, IT Systems Administrator Long Nguyen equipped employees and the company’s new headquarters with new technology, including high-end notebook computers, a robust wireless network and high-definition projectors for conference rooms.

“We’ve reinvested the money for different IT needs and services,” says Nguyen, who joined the company in early 2011. “We’re able to spend extra money on high-quality hardware for our employees, and we couldn’t have done that if we still had the data center.”

In today’s economy, savvy IT leaders at small and medium-sized businesses are pursuing technology projects that create operational efficiencies and provide long-term savings. Doing so allows them to reinvest the savings in other important technology projects.

It’s a smart strategy because it allows companies to pursue IT projects that otherwise may not get funded, says Ray Boggs, vice president of small/medium business and home office research for market intelligence firm IDC.

“It really distinguishes successful small businesses from those that are puttering on,” Boggs says. “IT administrators are saying, ‘Let me spend our resources to be more efficient, and then let me reinvest those savings.’ The idea is to drive productivity, empower workers and sharpen processes, which can increase profits. That’s the hallmark of an effective small business. They are not locked into traditional approaches, but are looking for better ways to operate.”

In fact, cost reduction and improving business processes are the two biggest drivers for IT spending decisions in 2012, according to a survey of 614 IT administrators by Enterprise Strategy Group. Initiatives that stretch the IT dollar and reduce costs include cloud computing, server and desktop virtualization, and outsourcing IT services to managed service providers.

Silver-Lining Savings

Last year, for practical, strategic and economic reasons, Apigee turned to an infrastructure as a service cloud provider to meet its data center needs.

The company was moving to a new building in Palo Alto, Calif., that had no space for its 50 physical servers. In addition, many of its customers wanted to access Apigee’s software as a service cloud offering, so using a cloud infrastructure provider allowed the company to quickly provision services to customers, Nguyen says.

[28%]

The percentage of businesses that use cloud computing services as a way to control IT costs, up from 13% in 2009

SOURCE: 2012 IT Spending Intentions Survey (Enterprise Strategy Group)

The 7-year-old company, whose staff has doubled from about 125 to 250 in the past year, provides software for developing, managing and tracking application programming interfaces (APIs) that are used to create web, enterprise and mobile applications. Netflix, for example, uses Apigee’s software to manage its APIs that are used to stream videos to consumers on devices such as tablets, DVRs, DVD players and HDTVs.

Last summer, Apigee’s operations team spent three months migrating its applications and data, as well as customer data, to the public cloud. Once completed, Nguyen decommissioned the 50 servers and sold them off.

Getting rid of the data center reduced cooling and energy costs, and freed the company from needing to hire another full-time IT staffer and additional contractors to manage the data center, Nguyen says. Overall, he estimates the move to the public cloud saves the company about 10 to 20 percent on data center costs per year.

“When hardware failures occur, it takes time and money to troubleshoot,” he says. “We don’t want to be in traditional IT and manage servers, so at the end of the day, the cloud was the right choice. The cloud provider does all the support for us.”

Nguyen has used the money saved on the data center to furnish the new office with new technology to boost worker productivity and morale.

“Before, we had this expensive server room, and the office was old and rundown,” he says. “We came into this new building, which has a nice design, and we have cool technology everywhere. It makes people feel good that everything in the office is high-tech.”

Over the past year, many employees have received new MacBook Air and MacBook Pro computers. In the past, Apigee had a limited budget for each employee’s computer setup, which included a new notebook computer, software and a used monitor, keyboard and mouse. Now, Nguyen can spend significantly more, allowing his department to purchase hardware such as new peripherals and an external hard drive for data backup.

Since moving to the new office in August 2011, he’s replaced aging projectors with new ViewSonic high-definition projectors in four conference rooms. He has also purchased new project management software tools, including cloud-based customer resource management software, to improve workflow.

Apigee’s wireless network also received an upgrade. In the old building, the company had one wireless router, providing a slow, spotty Internet connection. The new office has 12 Apple wireless routers, providing plenty of bandwidth.

In three years, Apigee has grown its customer base to hundreds of enterprise companies, including AT&T, Best Buy and Equifax. Although the cost savings from moving the data center to the cloud has allowed Nguyen to purchase new equipment, management has also increased the IT budget because of the company’s sales growth and success.

Cost-Effective Connections

In 2010, PSC in Houston was in the market for a new wide area network (WAN) that was faster, more dependable and more cost-effective. At the time, the waste management company, which processes hazardous environmental waste and provides industrial cleaning and maintenance services, was frustrated with the traditional multiprotocol label-switching and T1 infrastructure it was relying on.

Jim Burns
Photo: Rocky Kneten

Moving to managed network services has helped PSC save $500,000 a year. “It’s like finding gold,” CIO and CTO Jim Burns says.

PSC paid $1 million a year to a large serv­ice provider for WAN services to connect its 100 offices nationwide, but network outages were happening too frequently, CIO and Chief Technology Officer Jim Burns says. Network uptime is critical for the 4,500-employee company, whose clientele includes Fortune 500 companies.

The company had one T1 line in each office location, and if an outage occurred, downtime could last one to three days, Burns recalls. “We lost a T1 connection about once every two weeks,” he says. “It was not good.”

Burns turned to managed service provider Network Partners Inc. (NPI), a CDW partner, to design a redundant IP-based network using a variety of Internet connections. Lloyd Dawson, director of IT compliance, security and networks at PSC, oversaw the project, under which the waste management company switched to the new managed IP network in October 2011.

The move increased bandwidth speeds for PSC and improved reliability at half the cost, Burns says. “We’re roughly saving half a million dollars a year. That is big money for any company. It’s like finding gold,” he notes. “We can take these savings and put them into other projects.”

In its two-person Bangor, Maine, office, the company used to pay $3,000 a month for a T1 line that provided throughput of 1.5 megabits per second.

Now, the Bangor office has two cable connections providing 5Mbps download speeds and 2Mbps upload speeds for $400 total.

The new IP-based WAN is managed and monitored at all times by NPI in Houston. Instead of relying on one serv­ice provider for T1 connections, PSC now uses an IP network based on cable, DSL, fiber-optic, 4G wireless Internet service and some T1 lines from local service providers at each of its office locations. Data rates are now two to 25 times faster.

To improve reliability, PSC subscribes to two IP connections for each of its offices. If one connection goes down, the other takes over automatically within eight seconds.

“We have had circuits fail and the office personnel were not aware, since the automatic rollover happens so quickly and behind the scenes,” Lloyd says.

Each PSC office is connected to the WAN through a virtual private network. NPI installed a SonicWall firewall for security and the VPN connections, says NPI CEO Bill Hood.

With a more reliable, cost-effective network, PSC is using the savings for other tech projects. The company is buying new automation equipment and tablets for its mobile employees. It’s also buying software to optimize workflow and increase business intelligence capabilities.

“It’s $500,000 in savings every year. It allows us to have the resources to work on other important projects,” Burns says.

Better Print (and Budget) Management

As the IT and procurement manager for a small business, Larry Bell is always fiscally responsible when buying equipment and supplies. So when his company, Probe AKS in Houston, needed to purchase a high-end printer, he shopped around for the best deal.

“I look at it as if it’s my own bank account,” says Bell, who also works as a software engineer and technical support specialist for the company. “I want to save money, even though I don’t own the business.”

Larry Bell
Photo: Rocky Kneten

Larry Bell, IT and Procurement Manager for Probe AKS, expects managed print services to save his company money in the long run.

His company, previously called AKS Technologies, designs and manufactures measurement tools and recording instrumentation for the oil and gas industry. It was acquired in August 2011 by Probe Holdings. The AKS portion of the company operates as a subsidiary, and Bell remains its IT manager.

After shopping around, Bell leased a $9,000 Xerox WorkCentre 7535 color laser multifunction floor-model printer and pays a little extra for 24x7 technical support and next-day repair. He also signed a four-year managed print services contract through CDW, which locked in toner prices.

The leased printer, combined with the managed print services contract, simplifies IT management and reduces costs over the long-term, Bell says.

The 17-person staff in Probe AKS’ Houston office previously relied on a small $700 Xerox color laser multifunction printer for its sales and marketing needs. But the company needed a larger, more feature-rich machine that could fax over a local area network and better handle its large-scale, high-quality printing requirements.

Bell expects that the extra money he is paying for maintenance and support will be worth it when the new printer needs repairs. “It will save us money in the long run,” he says.

The managed print services contract will also cut down on toner costs. By signing a four-year contract, the company is locked into a price.

Using a pay-per-click payment model, Bell gets an unlimited supply of toner and pays CDW half a cent for each black-and-white page and 7 cents for each color page.

As toner prices rise, Probe AKS won’t have to pay extra for each print job, which will save the company even more money, Bell says. The company will be able to use these savings to purchase other equipment and supplies, he adds.

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May 31 2012 Spice IT

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