Businesses and government should always be keeping an eye open for new ways of saving money. If this advice had been followed over the last two decades, we might not be having these problems with our economy. The problem is that most businesses only take advantage of the cost cutting techniques that hit them in the face. I would like to propose that businesses and government agencies should have small departments dedicated to research and development of cost management. If the right people were hired for the job far more money could be saved than it would take to fund the department. I have some suggestions on how this should be handled.
The first thing to consider with cost management is where money is being spent. Retailers probably already have someone who negotiates prices with wholesalers. The new department might be a good place for this person.
The next thing to consider is operating costs that don't result in direct income. Supplies like toilet paper, paper hand towels, cleaning supplies, receipt paper, and office supplies are among these. At my job, our store has changed the style of paper hand towels we put in the bathrooms three times. Each time the claim has been that the new method will save money. The funny thing is that we are now back to the ones we started with, but we had to replace the dispensers each time, so ultimately, even if each change saved money on towels, we incurred extra costs on the dispensers. If I was to make a guess, I would say that we are probably not the only store in the corporation that has done this and I would also guess that there are currently other stores using the less cost effective route. It may be that costs differ between regions because of shipping costs or other variables, but if we had a person calculating these costs, there is a very good potential that we could save enough to pay this person's salary, as well as save additional money. The person in this position would probably be in charge of bathroom supplies, cleaning supplies, and office supplies.
The next area is IT. Technology is an area where most businesses are either willing to spill money into it like a black hole, or they go as cheap as they possibly can. Neither of these are cost effective methods of running a business or government agency. Companies that go cheap on technology generally suffer for it (although, since they have never had sufficient technology to begin with, they usually do not even realize it). On the other hand, it is pretty obvious to most people that businesses that pour money into technology suffer from lack of funds elsewhere. Businesses and government agencies need technology workers who have an understanding of what the organization needs. The problem here is that many IT professionals do not want to cut costs; they want the business to have cutting edge technology. Now, there is nothing wrong with wanting the cutting edge for your home, but you do not need a gaming computer for running the business's accounting software.
What businesses need to look for is IT people who understand what the business needs and what it does not need. An important thing to look at when hiring an IT worker for this type of position is someone who has a good knowledge of all current technology. A good test for this is another article I wrote: Open Source Software in Business and Government If your candidate reads this article and is surprised to learn the things it discusses, they are definitely not the person for the job. The article outlines many ways an organization can save money on software licensing costs. The information therein is widely available for anyone with access to the internet. If your candidate has not been able to discover this information on their own, do not expect them to suddenly become good at finding other cost management information just because you hired them to do it. You may actually be better off finding someone without certifications or degrees, if they have the ability to find information like this. A good person for the job might be someone who has never bought a new computer in their life, but is able to do everything they need with the computers they have. These people have probably used their cost management abilities to obtain computers that are sufficient for thier needs at the lowest possible cost. This kind of candidate would be ideal for an IT cost management position.
The most expensive things most businesses buy are computers and software. Some businesses have managed to cut costs by using free software alternatives (see the article mentioned in the previous paragraph). One of these businesses is Lowe's. Lowe's uses the Linux operating system for their POS system, as well as most of their order management system. Even a small proprietary alternative would cost at least $50 per computer and Lowe's has at least 30 computers per store. That is a savings of at least $1,500 per store. For a large corporation, that does not seem like much, but if Lowe's has 200 stores (I believe it has more), that adds up to $300,000. Not only that, but eventually computers must be replaced and each replacement would cost another $50 for licensing costs for the software.
Since my other article covers software very well, we are going to discuss hardware. Businesses often discover that they can save money by making contracts for hardware, like computers. The problem with this is that frequently businesses and government agencies accept poor contracts because they believe that because it is a bulk contract, it must be a good deal, and no one wants to take the time (or has the knowledge) to shop around. Often this results in expensive long-term obligations. In additon, many companies that sell preconstructed computers use low quality products that will not last very long. Good warranties and service plans can circumvent some of the costs associated with these problems, but you should also consider downtime for broken hardware. This is an area where a good IT cost management employee is valuable. Many IT professionals might recommend that you sign a contract with a company like Dell, or Gateway. In some cases this might be cost efficient, but many times a good IT expert (with some cost management skill) can find a better deal than that and in addition, they may be able to arrange it without a long term contract that may become oppressive in the future. (Consider a contract that has you paying $1,200 each for a computer that was good 5 years ago, when you signed the contract.) This is not work that a normal IT graduate has been trained in, so businesses should take care when looking for people for this sort of position.
There are many ways businesses and government can save money, but lack of technical knowledge, lack of time, or just plain laziness often get in the way of this. If no one is willing or able to do this kind of work, businesses and government agencies should consider hiring people to do it. Even if your business is not struggling, it is a good idea to consider this, because someday it may make the difference between business as usual and going under. Most government agencies are already underfunded, so they have no excuse for failing to find ways of stretching our tax dollars. In some cases, businesses may not benefit from this sort of program, but since most businesses will benefit from it, it is worth the risk to invest in better cost management.
Lord Rybec
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