5 technology mistakes smart companies make—and how to avoid them

Technology cost-cutting has dropped a grenade on the bottom line at companies big and small. The typical $1 billion enterprise wastes as much as $6 million a year on outdated printers and decrepit copiers alone. Old gear slaps a $30,000 monthly charge on a 200-seat dial-in network that can easily be slashed by two-thirds with a simple upgrade. Even phone lines—many of which go unused—can cost thousands a year just to be an eyesore on the wall.

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The vogue for exploding IT budgets has gone beyond all common sense. Ziff Davis Smart Business discovered that the bill for keeping obsolete technology past its depreciation is higher than you'd ever imagine. Certainly not all upgrades pay for themselves. But here are five easy ones that will prove themselves in profits.

As much as you'd like to believe that office printers are going the way of the typewriter and the telegraph, the number of pages printed between 1995 and 2005 will more than double, according to Xplor International, a company that studies electronic document systems.

Hard-copy output costs from 1 to 3 percent of a company's total revenue, according to printing company Lexmark International. That means a $1 billion company spends $10 million to $30 million a year on printing. Expenses don't end there. Printing-related help desk calls make up 10 to 50 percent of the user traffic that crosses your IT manager's desk, according to Gartner.

When the Medicaid division of the state of Mississippi approached Lexmark about changing its cumbersome purchasing and payment processes, its 600 employees were hardly working in a paperless office. The division spent a lot of time and most of its $2.6 billion budget on processing health claims—on a rickety old dot-matrix printer. The aging machine had become not only slow, but difficult to run, says Terry Childress (pictured), director of information services for the agency. "We made the decision to change," Childress says.

Lexmark devised a simple solution. Outfitting the agency with a new color laser printer with a copier/scanner add-on reduced output costs by up to 20 percent, the printer maker estimates.

The division now stores almost all of its forms electronically—some on a central server, and some on the printers as templates—and employees download them from the intranet. Rather than stocking paper copies that must be discarded every time forms change, employees print them only as needed and make fast changes and updates online. And instead of sending a courier to deliver files, Childress just scans information and sends an electronic version via e-mail in minutes.

How do you go about cutting your printing costs? Job number one: Standardize equipment. "If you've got a different fax, printer, and copier in every department, you're buying different toners, panels, and manuals," says Brad Patten, president of BitWits, an IT outsourcing company.

Patten concedes that you may be tempted to save money by buying whatever printing equipment is on sale. But, he warns, "it's very expensive to maintain a mishmash of systems. The drivers are different, the look and feel and operations may be different. The more you standardize, the more people in the office can help each other, which lowers the cost of hiring people like me." It also saves in training and support costs.

On the other hand, the most efficient upgrade for many printers is retirement. Kevin Spinks, U.S. marketing director for Lexmark's Business Printer Division, says that people ought to be printing less. "I can't think of a business process that doesn't contain information on a piece of paper. Instead of sending paper by FedEx, companies ought to put paper documents back into an electronic system."

Spinks suggests that several strategically placed multifunction devices can replace the typical junk-lot of printers, copiers, fax machines, and scanners. The cost savings can be enormous. "I'm talking about a 15ppm laser that you can attach a scanner to for less than $2,000—total. This way, a workgroup has access to a device that sits on the network and acts as a fax, printer, scanner, and copier.

How do you cut the cost of keeping remote workers connected? Ann Sorensen, business development manager at telecommunications consultancy Intelligent Networks, faced just such a dilemma with one of her clients, an insurance company with 800 people in its main office and a couple hundred more scattered in several regional outposts. The company was spending tens of thousands of dollars each month for its remote workers to connect to its network.

"The company's home workers dial into a modem bank via an 800 number, and the company spends $30,000 per month on dial-in costs," says Sorensen. "But by implementing a new IP-based virtual private network, we would cut those costs by two-thirds."

A VPN is a private, secure data tunnel on the Internet. Many companies already use VPNs to connect their networks of remote offices. If your company already has one, a new Internet-based VPN will hugely reduce your network maintenance costs.

OpenReach provides software that will transform any collection of broadband Internet connections into a VPN—without using outdated, expensive technology. "We've seen companies that are spending $250,000 to $300,000 a year on eight location networks with file sharing and e-mail consolidation," says Mark Tuomenoksa, OpenReach CEO and founder. Using his system, he estimates companies can slash that amount to $50,000 and have the flexibility of using any Internet connection they want.

Netscan iPublishing is a Net-based publishing company based in Falls Church, Virginia. Its editorial operations are in Jacksonville, Florida. Editors send a huge volume of data to the home office every day, which they had been doing using FTP. "It was slow, unreliable, and time-consuming for our employees," says the company's president, Harvey Golomb. "Via FTP, the transfer took at least an hour and a half per day, and it would often have to be redone because the system was unreliable."

When Netscan iPublishing switched to an OpenReach VPN a year ago, Golomb saw the benefits immediately. "It now takes 15 minutes to do daily file transfers, and the system is completely reliable." The VPN's cost: $300 per month for three offices.

But much of the cost of maintaining a network comes from buying and maintaining the equipment. Fast servers are just as important as speedy network connections—and they're also some of the most expensive pieces of hardware your company will ever buy. Without an asset-management system in place you could lose thousands of dollars on each machine.

"It's really important to have an understanding of the current and future value of your equipment," says Brian Clarke, vice president of pricing and asset management at IDC. "You don't want to be sitting on a number of servers that you aren't fully using. Because today [your used equipment] may be worth a few thousand dollars apiece, but 10 months from now, it may be worth next to nothing."

Bet you didn't know the pc on your desk is eating company profits on the sly. Just ask your help desk folks. As new employees are hired, they tend to get the latest technology, the current versions of operating systems, and the newest iterations of applications.

Over time, this adds up to a support nightmare—and a sinkhole for money. When Carolyn Strandberg started working as the office manager of Phoenix law firm Peshkin Kotalik & Burghart, she was appalled at the state of the firm's computing equipment. "The components were nonstandard, and everything required custom configuration by the outside technician we were using," Strandberg says. "At one point, we had a series of problems with the equipment, and for a couple months, he was here two to three times a week."

Not only were repair and maintenance bills on a steady climb, but lawyers were losing billable hours for downtime. "We needed to have the equipment up and running at least six days a week," Strandberg says.

A new technician helped Strandberg (pictured) find a solution. First they replaced the hodgepodge of PCs with systems from Dell Computer. Then they outfitted the machines with the same operating systems and software and added a small-business server.

Now, says Strandberg, "The configuration issues that used to plague us are at a minimum, the reliability of our equipment has improved tenfold, and we hardly ever need to call in the technician."

Even partial upgrades can pump up productivity. Ziff Davis Smart Business Labs found that frequently replacing peripherals such as displays and video cards can increase the speed of a PC and thereby the productivity of the employee using it. Our testers found that a business user with a monitor at 1,024-by-768 resolution who upgrades to an 8MB video card from a 4MB card running at 800-by-600 resolution will save 110.2 hours per year.

Likewise, conserving energy can help you slash costs. Start by replacing your CRT monitors. Energy-friendly flat-panel displays use a fraction of the electricity. A 15-inch Energy Star flat panel display sips 25 watts of power, compared with 90 watts for a 17-inch CRT. Because LCDs use less power, they produce less heat, so it costs less to cool an office with lots of monitors. "We estimate that installing flat-panel displays saves 34 percent in power consumption, and then an additional 20 percent on cooling costs," says Chris Connery, product line manager for LCD monitors at NEC-Mitsubishi Electronics Display.

In California, where electricity costs hover around 25 cents per kilowatt hour, the savings with an LCD monitor are even more dramatic and help offset the initial investment in a flat-panel display, which costs three to four times more than a CRT. A study by NEC-Mitsubishi shows that its CRT monitors cost about $40.94 per year in power use, while their LCDs cost about $11.50. Plus, LCDs have a higher resale value than CRTs, which are usually worthless after a year or two.

You can also cut costs simply by buying equipment that's more energy efficient. According to Energy Star, a company with 1,000 typical computers and monitors spends $39,012 a year to keep them running. With Energy Star–labeled equipment, the cost is $17,361. Likewise, 100 laser printers and high-speed copiers that meet Energy Star qualifications save another $2,500 per year on energy costs.

"We still see a lot of businesses trying to manage dial-up connections," says IT outsourcer Brad Patten. "Just last year, we had a law firm with 30 people, and everyone had a 28.8Kbps modem in their computer; they couldn't be on the Internet and the phone at the same time.

"It had been like that for years, and the company was spending $500 to $600 per month on these dial-up connections."

Patten says he upgraded the company to DSL, and productivity received quite a boost.

"The financial savings were tremendous," says Mindy Clausen, the company's office manager. "Now we're paying about $100 per month for DSL, which reduced our monthly overhead by $500."

You can fatten your bandwidth with a fixed-wireless alternative too. Services such as Teligent, Fuzion, or even traditional telecommunications companies such as Sprint Broadband Direct now offer wireless Internet access at speeds that meet or exceed those of fast T1 connections across a company campus.

Meanwhile, costs for the industry-standard T1 or T3 line are decreasing. Yet companies often spend far more than necessary for these connections. Bruce Judson, a faculty fellow at Yale School of Management, founded a Web site called Speed Anywhere that specializes in finding businesses the best bandwidth system at the best price.

For small businesses, Speed Anywhere may simply provide the software that speeds up their existing Internet connections. But for large corporations, Speed Anywhere hooks companies up with T1 and satellite connections from providers such as CAIS Internet for as little as $699 per month.

It's hard for even small companies to get a clear picture of what they're spending on equipment, services, support, and logistics. Harder still is to measure these costs against productivity and the bottom line.

Ann Sorensen of Intelligent Networks says that most companies throw away money by the fistful because they can't keep track of all their equipment, contracts, and bills. The logistics for cost analysis can be a nightmare. Sorensen experienced this in the process of upgrading her insurance company client's networking and telecommunications system.

"This insurance company is moving a lot of its workers out of the corporate offices and into home offices," Sorensen says. "For this reason, we're looking into putting in telework equipment so that employees can dial into the main network and it will seem almost as if they're working in the office.

"When we first looked into this, we realized that we [could not] implement this system because the PBX phone system is antiquated." With the old system, a telecom technician spent hours every week moving handsets around the office. Worse, the outdated Siemens system cost about $60,000 a year to maintain.

Ditching the old way for a more modern IP-based PBX would allow workers to dial in, and it would cost less. A network-based system from Interactive Intelligence works with the existing PBX system and would cost the insurance company about $200,000—with a yearly maintenance cost of less than $10,000.

Phone lines are another cash drain, says Sorensen, whose team test-calls every phone line in every one of their customers' facilities. They've found that 30 percent of the phone lines that turn up questionable—no one answers or they give a busy signal—lead to nowhere. "If an employee leaves or a line is moved, the company forgets to alert the service provider, or they aren't able to check that the changes have been made. So the company is getting billed for nonexistent lines," says Sorensen. "That's only about $40 per month per line, but it really adds up."

Once these internal costs are cornered and tamed, you'll want to analyze what you're spending for outside services. Most PBX-based phone systems can't handle sophisticated conference calling, for example, so companies have to go elsewhere for this crucial feature. But it doesn't come cheap.

"When you're doing conference calling through a service, you're paying 30, 40, 50 cents per minute, per leg, per user—that's expensive," says Mark Winther, group VP of worldwide telecommunications at IDC. For a 30-minute phone call with five participants, that works out to a minimum of $45 per call.

Belarc, a company that provides PC-management software, has three sales offices and a team of remote software developers. Conference calls were crucial to keeping everyone informed, but the company found it could no longer afford its old conference-calling system. "We used to employ a traditional conference-call service," says Belarc chairman Sumin Tchen (pictured). "We had a PBX phone system, but we had people working across the country, so not everyone was on the same system. To make conference calls, we would have to arrange the conference call time, distribute an 800 number and a pass code, and have everyone dial in at a certain time. The system worked fine, but we were paying 24 cents a minute per line, per person to use it."

Then Tchen heard about a service called eDial, which provides Web-based conference calling for one-third the price. "Switching to eDial was a no-brainer: 8 cents a minute vs. 24 cents. eDial does give you a bit more control and it's easier to set up, but those are minor issues compared to the cost savings."

eDial and other Internet telephony services such as Acallto and Evoke Communications enhance your existing telephone system with easy-to-use, inexpensive conference-calling capabilities. With eDial (which will soon also offer a hardware system for enterprises) you can dial a number through a Web interface by clicking on a person's e-mail address in contact software such as Microsoft Outlook, GoldMine, or Maximizer. You can conference call without being forced to buy expensive bridges or pay a premium to a service provider.

For small-business owners, maintaining a huge PBX system may not even be an issue. But you can still save money by keeping your service agreements up to date. Avoid signing long-term contracts or long-distance service agreements, says tech consultant Patten: "Reevaluate your phone and Internet service agreements every year because you'll frequently find you can save money or get special deals from one year to the next."

For a professional evaluation of your communications, consultants like Teletron and Intelligent Networks will audit your office for you, including your phone system and long-distance plans. Intelligent Networks boasts an average 26 percent reduction in overall annual expenditures for its customers, and it offers a guarantee that it will reduce your company's operating expenses by 150 percent of its fee or it will refund the difference.