The hidden costs for outdated technology are bigger than you think. Here's how
to reclaim precious time and money.
Technology cost-cutting has dropped a grenade on the bottom line at companies
big and small. The typical US$1 billion enterprise wastes as much as US$6 million
a year on outdated printers and decrepit copiers alone. Old gear slaps a US$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.
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
Ditch your rickety old printers and spare your budget.
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 US$1 billion company
spends US$10 million to US$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
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 US$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
Money, a US$1 billion enterprise, saves annually by streamlining printing: $2 million to $6 million .
Percentage of corporate revenue typically spent on printing each year: 1 to 3 percent
Go from spending US$300,000 to US$50,000 and have the flexibility of using any
Internet connection you want.
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
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 US$250,000 to US$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 US$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: US$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."
Money saved monthly by upgrading to an IP-based VPN for about 200 remote users:
Time your IT workers save by automating software upgrades: 3 to 4 days per
Increase productivity and cut power costs with a few strategic upgrades.
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
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 US$11.50. Plus, LCDs have
a higher resale value than CRTs, which are usually worthless after a year or
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 US$39,012 a year to keep them running. With Energy Star–labeled
equipment, the cost is US$17,361. Likewise, 100 laser printers and high-speed
copiers that meet Energy Star qualifications save another US$2,500 per year
on energy costs.
Money saved in annual power consumption, per monitor, by upgrading to LCD displays:
Money saved annually on 1,000 Energy Star–labeled computers and monitors:
Pick up the pace and cut the costs by upgrading to broadband.
Everyone wants more bandwidth. but have you ever stopped to calculate the costs
of sleepy Internet connections?
"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 US$500
to US$600 per month on these dial-up connections."
Patten says he upgraded the company to DSL, and productivity received quite
"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 US$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 US$699 per month.
Time saved per user per year by upgrading from 56Kbps dial-up to a T1 connection:
Money saved by upgrading a 30-seat office from 28Kbps dial-up to DSL: $500
Save money with every conference call by moving from traditional conference-calling
services to Web-based providers.
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
"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 US$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 US$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 US$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 US$45 per
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.
Money saved by making a 30-minute conference call with a Web-based provider
vs. a traditional conference-calling service, with 10 remote dial-ins: US$48
Money wasted monthly on 10 nonoperational phone lines: US$400