For CIOs, it’s a dreaded statistic: Between 60 and 70 percent of IT budgets typically goes toward the maintenance of current systems — otherwise known as “keep-the-lights-on spending.” Less than 30 percent, meanwhile, ever finds its way into new applications development.
It’s a trend that Robin Johnson was looking to break when he was tapped Dell CIO in January 2009. But first, he set out to challenge a few industry assumptions.
“The term ‘keep the lights on spending’ implies there’s nothing you can do about it, it’s fixed,” says Dell CIO Robin Johnson. “We re-examined everything.”
That hard-nosed reexamination has paid off. Big time. Dell now devotes a staggering 52 percent of its overall IT budget to new development. This year alone will see an additional $60 to $80 million added onto current savings, bringing the total to $240 million over a two-year period.
But the focus hasn’t been entirely on cutting costs for its own sake, Johnson’s quick to add. “Crossing the 50 percent threshold this year was our goal, but it wasn’t simply about cost,” he says, “it was really about being able to do more for our customers through development.” Those developments include Design Studio; PartnerDirect; as well as a build-out of complex configurations, SANs (Storage Area Networks), among them.
Push to standardize operations
A big driver in Dell’s cost-cutting success has been its move to standardize applications globally. With operations in roughly 90 countries, Dell had about 8,000 applications two years ago. Today, that number has fallen to 2,600 — and dwindling. “We’re looking for a 20 percent reduction again this year and the year after,” says Johnson. “We have a myopic view on standardization — I would call it ruthless standardization,” he adds.
Driving that standardization is a continued move toward the x86 platform — it’s helped take thousands of engineering hours out of the environment. “I only configure the machine two ways … I run a Microsoft .Net image for online development, and an Oracle image for transaction processing,” says Johnson, who then uses an automated server provisioning tool to automate the process.
The x86 platform has also opened the door to virtualization technology on a wider scale, beyond Dell. “There’s innovation in a community as opposed to innovation from one company,” says Johnson. “It doesn’t matter whether you’re using Microsoft virtualization, or Oracle’s virtualization, or VMware — you get the same benefit from multiple vendors,” he says.
Standardization: Four ways forward
For Johnson, continued standardization is a moving target. “Do we know where the target is?” he says. “To be honest, we don’t, we just keep reexamining.” That constant reexamination holds more than a few industry lessons. Here’s a recap for what’s worked for Johnson’s team, and can for yours, too:
1. Reexamine everything. “Maybe the single biggest lesson I’ve taken is to reexamine what we do,” says Johnson. Including, he adds, presumably “fixed costs.” “We started putting wireless access points in our offices about 10 years ago – yet when we would build a new office we would still put in the hard wiring as well, so then when you would reconfigure an office you still had to move all those wires,” recalls Johnson. However, moving ports to floor relays proved costly, both in terms of installing wires at the beginning and then, relaying them. Johnson decided to go 100 percent wireless. “We saved the installation costs,” says Johnson, “but more importantly, we now save costs every time a building gets changed or the floors get relaid.”
2. Listen to your team. The idea of going 100 percent wireless came from an IT team, at a relatively junior level, around March 2009. “Very often, the teams understand the difficulties — it’s about listening to the teams,” says Johnson. Up until that point, the organization knew what to do, it just hadn’t formulated a plan. “There were too many applications, too much regional variance,” says Johnson. “It was really about listening and then, coming up with what to do about it.”
3. Accept the work is never done. “This is a lifestyle, not a diet.” That’s Johnson’s answer when asked about the end target. As Johnson explains: “We need to operate this way every year. What worries me is that, when the economy tanks, saving money becomes en vogue … people get serious about clean-up and housekeeping. As the economy improves, the biggest thing that concerns me is, ‘How do we keep management’s focus on sticking with the lifestyle?’” Johnson plans to stick with “the lifestyle,” regardless of economic fortunes. “The hallmark of successful organizations,” he says, “is how well you manage in the good times, not just the bad … it’s fantastic to see the results coming in, and it’s fantastic to see economies around the world in various stages of recovery, but we have to remain disciplined.”
4. Talk about business process, not just applications. That’s what it takes to remain disciplined, says Johnson. “I firmly believe the applications are just the embodiment of the business process,” he says. “We spend as much time discussing changes in the business process … that drives the program, and enables the team to take away the old applications to manage the infrastructure more efficiently.” In addition, Johnson is keeping an eye on a common industry pitfall. As Johnson puts it: “The big temptation is always to say, ‘We can’t turn this application off – it still has one feature that you haven’t built into the new system, so let it run. That’s what drives your costs — if you don’t deal with that, you won’t change the dynamic.”