Asset Managers May Untangle Complex Systems

By CIOinsight  |  Posted 06-05-2005

Asset Managers May Untangle Complex Systems

Technology

You can't manage what you can't measure.

Complexity in IT is like the national budget deficit. It just keeps growing. And every urgent project that IT assumes just adds to it. It's no wonder then that a CIO Insight October 2004 study shows 74 percent of respondents find increasing complexity has stretched the technical capabilities of their IT staff. And 81 percent of companies say reducing overall infrastructure complexity is a top priority. Despite their efforts, however, IT shops are still wasting as much as one-third of their annual budgets on unnecessary IT equipment, maintenance fees and unused software licenses. And as the economy slowly improves and companies are again spending on new projects, simplifying systems remains a Sisyphean goal.

The reasons for all the complexity are, well, complicated. First, the rampant pace of mergers and acquisitions has left many IT shops inundated with disparate, dysfunctional systems, cobbled together out of necessity. Second, IT hardware—which includes not just servers and desktops, but PDAs, mobile phones and laptops—is getting cheaper, making items easier to acquire but no easier to track. "In the old days, everything that was important was bolted to the data center floor," says Jack Heine, an analyst at Gartner Inc. "Today, there are an awful lot of assets that have very vital information and provide the heartbeat for the organization—and they are scattered all over the place." Third, says Forrester Research Inc. analyst Andrew Bartels, Web-based technologies and software suites for CRM, supply chain and ERP are wonderful at addressing a wide range of business needs, but do nothing to simplify life in IT. "Complexity doesn't arise spontaneously," he says. "It arises because of business demands."

Even as companies struggle to trim fat from their budgets, the complexity issue is often overlooked. "When it comes to reducing costs, the first step is generally people, because it's easy. You cut them, they're gone," says Heine. But simplification creates many other benefits beyond reducing the complexity—and therefore the cost—of IT architecture. Fewer systems means better security, with fewer entry points for hackers. And simpler systems can even boost performance.

Attempting to reduce complexity, however, "is not a short project, nor is it for the faint of heart," says Heine. It can take as long as 18 months just to get a good handle on everything in your IT shop, and cost up to 3 percent of your annual IT budget. And sadly, some CIOs are terrified to open a Pandora's box and find out how bad things really are. But the first step is always going to be the same for any company: IT asset management.

Tell the executive team:
  • We can save significantly by reducing the complexity of our systems.

    Ask your cto:
  • When was the last time we conducted a full-scale technology audit?

    Ask your chief risk officer:
  • Are we putting ourselves at risk by not managing our assets better?

    The Solution

    The Solution

    Proper IT asset management creates more efficient business processes.

    IT asset management means not just tracking hardware, software and licensing agreements, but also mapping out the relationships between all of the above. Keeping tabs on the equipment you own is always a good idea, but using that information to simplify systems is a great idea. "There is little value to knowing the number of desktops and servers a company has," says Robert McNeill, an analyst at Forrester. "It's interesting, but if it's not linked into a business problem, there's not very much value."

    When it comes to software and tools, IT asset management breaks into two basic categories. There are autodiscovery tools that probe for assets across IT systems and report key metrics such as storage availability and -performance. And there are data repositories that keep real-time inventories of systems and help CIOs understand how assets are connected to one another.

    But it's not as easy as it sounds. David Farlin, vice president of IT at Borgata Hotel Casino & Spa in Atlantic City, N.J., uses asset management software from BMC Software to help his IT staff manage roughly 10,000 IT assets, but "the effort to do it—and do it well—was surprising to us." Developing common terms and setting up rules around reports and how things would be tracked was more complex than he expected, he says. "If I had to do it again, I would have put more resources on it than I did."

    Ask your CTO:
  • Does our current asset management product track inventory and relationships between hardware and software?

    Ask your COO:
  • How many people, and how much money, can we spare for an IT asset management project?

    Tell your line-of-business managers:
  • We'll need your help in developing a detailed accounting of IT assets.

    Mergers

    Mergers

    Asset management can help ensure you get the most value from the systems you acquire.

    For companies with an aggressive growth strategy through acquisitions, or for a company that is about to be acquired, asset management is a must. If you don't keep good records it is impossible to estimate the true worth of your IT systems, and that can affect the value of the deal. "If you don't have good record keeping, you can't substantiate an IT asset base for an M&A," says Heine. It's imperative to look at the to-be-acquired company's processes associated with IT assets because "you could end up acquiring things that have liabilities," he says, such as software without proper licenses.

    Barbara Rembeisa, president of the Inter-national Association of IT Asset Managers -(IAITAM), agrees. "We worked with a company that thought they had everything in IT under control as they went through their merger," she says. "They thought all they had to do was transfer licenses. They didn't know that the original contracts did not allow a transfer, and it ended up costing them over $400,000 just in legal fees."

    Navigant International Inc., the second largest travel management business in North America, knows how complex IT integration can be during a merger. Before the Englewood, Colo.-based company, which is the product of fifty-five acquisitions and continues to acquire several companies each year, installed its IT asset management system, it would rely on its newly acquired company's IT shop to provide information on its IT assets. Navigant's team would then prepare a blueprint for the merged systems based on that information. But the reports often were incomplete, forcing Navigant to send out one of their own IT staffers to assess the situation, thereby slowing down the integration process significantly. "We did an acquisition last year where the company's IT inventory was so overestimated it was a disaster—and even they admitted it," says Jeff Klingensmith, director of field IT management. "It wouldn't have changed our decision to purchase the company, but it would have changed the negotiation price."

    Klingensmith says that asset management software from Altiris significantly reduces the time it takes to convert new companies' desktops and servers to Navigant's systems. "Now we can immediately do network discovery on their systems, gather our own information and plan ahead, as opposed to them providing us with an often inaccurate list."

    Proper asset management helps not just in taking on new systems, but also in off-loading them. Vendors are quick to tout cost savings as a leading reason to outsource IT, but at least some of those cost savings can be found right at home. Software license agreements are notoriously mismanaged by customers that shut them in a drawer and never look at them again. According to Rembeisa of IAITAM, which offers certification courses in asset management, "software maintenance and support just isn't being managed accurately. Some of these contracts are millions of dollars each year, and companies just pay them" without checking to make sure they're being used, she says. Analysts estimate that companies spend as much as 20 percent more in licenses than are actually ever used. Getting a handle on your assets will give you a more accurate idea of what your software licensing costs should be, which may affect your decision about whether outsourcing is the best way to save. It can also change your opinion about the value of renting software instead of buying a traditional license.

    Before he installed asset management software from Peregrine in June 2004, David Fenrich, program manager of hardware and software at Cingular Wireless, admits the company wasted a lot of money on unnecessary maintenance fees. But what was once a manual process that involved many spreadsheets and much travel time—"It really wouldn't even have qualified for asset management," he says—has been automated so IT workers can quickly see how many licenses are being used, how many software programs need security patches and which pieces of leased hardware have licenses that are about to expire. So far, the company has seen an 11 percent increase in on-time lease returns, saving the company hundreds of thousands of dollars. "But where we save millions is in cost avoidance," Fenrich says. "Now that we have visibility into how our licensed software is being used, we don't need to purchase extra licenses."

    Ask your legal department:
  • Do we consider the legal liabilities in acquiring software licenses through acquisitions?

    Ask your CFO:
  • How do we determine the true value of an acquisition target's IT assets?

    Tell your executive team:
  • Let's consider how much we can save internally before we make the leap to outsourcing.

    Compliance

    Compliance

    A critical role in meeting federal regulations.

    While asset management might not seem to have an obvious role in meeting federal regulations like HIPAA and SOX, there are serious risks associated with unprotected and unmanaged data—especially data that entails sensitive employee or customer information. "Data security is becoming a very big problem in the U.S. and worldwide," says Gartner's Heine. Companies that do not protect personal medical records under HIPAA face fines of $250,000 and executives face up to ten years of prison time. Under Sarbanes-Oxley, firms that do not rapidly report events such as security breaches face harsh financial penalties and their executives face possible imprisonment. And if passed by Congress this year, the Notification of Risk to Personal Data Act (which was based on a similar California law) would fine companies $25,000 per day for failing to notify customers of a data security breach.

    All of this can be avoided with some quality IT asset management, Heine says, because IT managers need to know the types of data that are stored on each piece of hardware. "Let's say you have a server with some confidential client information, and you disconnect it, but don't dispose of it properly," he says. "That puts you out of compliance with protecting data. You can't just throw old equipment into a Dumpster. So knowing what you have, and having the paper trail to show that you have disposed of it properly, is a very important part of asset management."

    Navigant's Klingensmith says the disposal of old equipment is extremely important in his business, and something that his asset management software helps manage. "In our line of work, there's a lot of credit card numbers, so it's extremely important that those things get scrubbed out properly," he says. And with more than 5,100 employees and 1,000 locations across the globe, Klingensmith says his asset management software is "one of the most missioncritical products we have in IT."

    Ask your chief security officer:
  • Are we tracking what kind of data is on each device?

    Ask your CTO:
  • How do we dispose of old assets?

    Ask your chief compliance officer:
  • Have we considered how asset management can help us comply with federal regulations?

    To download a Fact Sheet, click here.