Telecom and Technology

Cost Reduction Proposal

Target:

To Improve Operational Efficiency Reduce Information Technology Operating and Capital Costs While Maintaining Optimal Value and Security.

Based on a technical solution in use at Microsoft, I would like to work with you to significantly lower the Total Cost of Ownership for COMPANY and implement similar server and data center consolidation across COMPANY by using these new management practices and taking advantage of technology enablers in new products. I am not able to predict the amount of saving possible, as it is dependant on your existing situation. Here are the financial details related to the Microsoft project.

Financial Changes Accomplished at Microsoft:

Data center, server consolidation: 40 percent reduction in spending.

The reduction in data center costs of $18.3 million.

Data Center sites were reduced by 54 percent, from 24 sites to 11 sites worldwide.

Infrastructure server reduction: 27 percent.

Move servers to data centers from branch offices: rent and maintenance reduced by 50 percent

Savings to date related to the consolidation effort total $23.2 million US, a 40 percent reduction from pre-consolidation spending levels.

Within the data center category, cost reductions associated with servers represent the largest savings, at $8.9 million. 3 years after starting this project 75% of all servers were located in managed data centers.

Site reduction: 54 percent

Real Estate and Facilities savings associated with server and data center consolidations of $2.6 million.

The savings include those costs from developing and improving previously used sites to be ready for consolidation. The savings also includes some operational cost avoidance savings. Operations were amortized over five years.

Network costs were reduced by 48 percent

Vendor support staff was reduced by 22 percent.

Microsoft did not use this time to lay off employees, but over 100 full time employees found different positions in the company at which time the positions was eliminated.

Status:

It is important that your IT costs are controlled and it is crucial not to lose sight of other benefits you can obtain using this process. In the Microsoft case, they are continuing to consolidate servers and data centers, refining the process based on criteria, such as bandwidth and latency. In addition, it is Microsoft’s goal that all application servers be moved or consolidated to remaining data centers. Server and data center consolidations have been immensely successful at Microsoft. The efficiencies of scale generated from the Consolidation projects provided significant savings, a reduction of 37 percent. The consolidation initiative was used as an opportunity to align IT with business strategy, delivering value by supporting and enhancing Microsoft’s business processes and meeting future demands as well as immediate needs.

Action:

CIO or CFOto finalize an agreement with Richard McLaughlin to execute a cost reduction project primarily based on success fees.