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Slimming down your Costs

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DQC News Bureau
Updated On
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Every business goes through good times and bad. During good times

entrepreneurs tend to overlook extra overheads, while bad times are the real eye

openers. This is then that they have to revisit their business processes and

make necessary changes to their cost structures.

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So while reducing travel expenditure has a direct bearing on recurring cost,

adopting greener technology and remote infrastructure management can have a

direct impact on capital expenditure. However, these measure do not serve as the

recipe for staving off an economic slowdown alone and can be tried even when

times are smooth. We take a look at five major areas solution providers (SPs)

can consider while cutting cost without impacting their businesses in a major

way.

Reduce overheads



Clients need to be served on a regular basis and hence the SP's sales force

needs to travel constantly to ensure better and prompt services. On the other

hand, as the owner of the company an SP may also have an extensive travel plan

chalked out, in terms of addressing the workforce for execution of a project.

Thus by reducing the travel cost businesses can look at bringing down the

recurring cost or operational cost to a large extent.

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Pointing out the areas one can reduce costs, Arun Gupta of Darts IT Network

said, “R&D, training, back-office staff, communication and travel expenses are

some of the areas that can be considered while reducing overheads.”

Rajesh Gupta, Director-Marketing, West, Intel India added, “The right way to

manage costs is to break the overall cost structure of operations and then

attempt to identify essential and non-essential costs. During good times

organiza­tions tend to add expenses and procedures not critical to run the

business. Similarly discretionary spending and non-essential travel related

costs burden the system. From time to time it is important to review these costs

and ensure there is a culture of planning travel and other activities in

advance.”

A majority of the costs an SP incurs come while delivering post-sales support

and services. Thus it is important to have a well developed post-sales

service-related process in place. This will help in minimizing costs, reducing

multiple visits and wastage of spare parts.

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Jayesh Kotak, VP-Product Management, D-Link India opined, “Innovation and

imagination are the only pre-requisites when it comes to exploring options of

reducing costs. SPs can look at reducing power bills, stationary bills, re-cycle

paper, consolidate travel, planned travel to benefit from better fares.”

A simplified

infrastructure can also help lower management costs with a common management

platform and tooling

Jyothi

Satyanathan




VP, IBM.COM, India/SA

Multi-tasking is

eminently advisable as it brings an



opportunity to explore other facets/strengths of person

Jayesh Kotak



VP-Product Management D-Link India

R&D, training,

back-office staff, communication and travel expenses are some of the areas

that can be considered while reducing overheads

Arun Gupta



CEO, Darts IT Network

Training the workforce and helping them develop the requisite and at times

extra skills always helps.

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Vivek Mahajan of Delhi-based INSE Solutions opined, “We are looking at

keeping our overheads low and thus reducing travel cost is one aspect that we

have concentrated on. Another initiative that we have carried out is in the form

of training our workforce. This has helped us reduce downtime in terms of

attending customer calls since that drives up the expenses.”

As part of their cost cutting measure, INSE Solutions has trained those

people who have been associated with the company for a long time now. Shared

Mahajan, “These employees have the qualification and are willing to serve us. By

imparting effective training to employees, who look after both pre-sales and

post sales, one can bring down expenses related to after-sales services and

travel at a go.”

5 ways to reduce costs
  1. Reduce overheads: Identify essential and non-essential costs
  2. Strengthen existing tie ups: Instead of expanding the number of tie

    ups, focus on existing partnerships
  3. Adopt cost saving technologies: Focus on technologies such as

    virtualization, Remote Infrastructure Management software and green IT
  4. Consolidate branches: Have one office in a region to cater to clients

    instead of having one in every city
  5. Get employees to multi-task: Encourage employees to multi-task and

    enhance skill sets so that salary cuts are not necessary
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On the other hand Surajit Sen, Director-Channels Marketing & Alliances,

NetApp pointed out, “It is important to look at opportunities and grow out of

trouble. The SPs should look at leveraging the eco-system and use their tie-ups.

They can also think of coming together and forming a consortium to carry out

joint marketing exercises which can help in saving money to a great extent.”

Strengthen tie ups



Very often, when exploring new tie ups, one tends to overlook the expenses

that will be incurred in terms of acquiring these very set of customers. While

establishing newer relationships is not ruled out, an SP should instead look at

strengthening relationships with existing clients and go slow on acquiring newer

customers.

“Instead of looking for newer clients one should look at consolidating and

strengthening relationship with the existing clients since acquiring a new

client is an expense in itself. Anytime we acquire a new client several expenses

related to marketing and services are incurred in the process of establishing

the relationship. This recurring cost is far more than the cost incurred in

delivering services to the existing client,” said Mahajan.

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Echoing similar sentiments, Sanjeev Bhavnani, CEO of Delhi-based Visesh

Infotecnics mentioned, “We are concentrating on our existing clients and not

jumping on to newer ones. But we will go for a tie up if we are sure of the

benefit that we will achieve out of the partnership.”

Technology helps



The kind of technologies available today can drastically help SPs reduce

their opex. This refers to they way they do business and also the technologies

they adopt in their own offices. Offering remote infrastructure services to

customers is one technology that can help an SP bring down the capex (capital

expenditure) and opex (operating expenditure) to a large extent. Acquiring

Remote Infrastructure Management software can be of immense help in terms of

reducing costs. Every time one sends across an employee to the client's location

an expense in the form of traveling is incurred. Given that an SP serves a

number of clients at a time, adopting remote management software can help reduce

costs to a large extent.

“We are in the process of acquiring Remote Infrastructure Management Software

as part of expanding our portfolio aside to ensuring apt utilization of

resources and value for our customers. This is the best time to consolidate

instead of looking at newer clients. We are getting our people certified and our

data center professionals trained so that the existing workforce can be used

effectively to reduce costs,” pointed out Mahajan.

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Utilizing technology internally also helps in cost reduction. Bhavnani of

Visesh Infotecnics said, “We reduced our international travel extensively and

instead resorted to phone/web conferen­cing and VoIP in certain processes to

bring down costs. Thus we created virtual meeting platforms to cater to our

clients. Besides, we also made additions to our existing Remote Infrastructure

Management portfolio. The tangible benefits that we have been able to see have

come in the form of reduced operating expenditure.”

Another thing the company can do is adopt green IT and CRM (Customer

Relationship Manage-ment) tools internally.

Instead of focusing on cost cutting, Gurgaon-based Progression Infonet has

looked at ways to optimize costs. Rohit Luthra CEO of the company mentioned, “We

have gone ahead and invested in yet another genset that saves the company fuel

cost since it is a low capacity equipment and not hungry for power. Hence, green

IT is one of the options that can be explored in order to optimize cost.

Deploying this genset has helped us reduce electricity cost to a large extent.”

Luthra further added that Progression has also looked at offering

virtualization as one of the options to bring down the capex to a large extent.

Citing the example of a large media company, Luthra elaborated, “One of our

cliets is a large media firm in India. The company was looking at revamping its

IT infrastructure even though it did not have a huge IT budget at its disposal.

By adopting virtualization our client was able to bring down their capex from Rs

20 crore to 5 crore. This investment helped them bring down their opex as well

since our client eventually made huge savings on its electricity bills by opting

for virtualization.”

According to Jyothi Satyanathan, VP, IBM.COM, India/SA, “Consoli­dating to a

virtual infrastructure helps companies increase server utilization rates from

five to 15 percent to over 70 percent, thus helping improve TCO and achieve an

attractive ROI. A simplified infrastructure can also help lower management costs

with a common management platform and tooling.”

consolidate branches



Yet another option that can be looked into while reducing cost is

amalgamating the branch offices. So for example if you have an office in

Bengaluru and Hyderabad that is catering to the entire Southern region, the two

can be combined to offer the same set of services from one office itself.

Closing those branches that are not churning out huge profits can also help

bring down costs.

Rationalization of office space is something that Bhavnani had explored as

part of his cost saving strategy for Visesh Infotecnics. “We had excess space in

certain locations that was not being used to its fullest capacity. Hence, we

explored options such as selling and renting out these very offices. We shut

down our office in Mohali (area-1500 sq ft) that was catering to one of our

large customers in Punjab and shifted to a residential accommodation instead.

Our resident engineers were shifted to this new office to offer the same set of

services,” shared Bhawnani.

Citing yet another example, Bhavnani shared about his BPO firm located in

Gurgaon that covered nearly 26,000 sq ft area. Visesh surrendered the space in

the wake of the global economic slowdown. “We had been paying rent for the BPO

accommodation for over a year but realized that it was turning out to be a huge

cost for us since our overseas clients had stopped expanding. Hence, we resolved

to surrender that office. In addition our offices in Bengaluru and Delhi were

rarely being used and we have now given them on rent instead of maintaining

them,” he quipped.

Encourage multi-tasking



Salary cut is the last option that one should consider when it comes to

reducing costs. It is not only a non-constructive way to do business but also

demotivates employees. Hence, while the fixed costs should be left untouched it

is the variable costs where reduction options should be explored. SPs can then

look at introducing bonus and incentives based on performances and make changes

in the variable cost structure. Besides employees can be encouraged to indulge

in multi-tasking.

Mahajan of INSE Solutions elucidated, “While one can look at holding

increments, no changes should be brought about in the fixed cost. One can stop

increments and look at giving bonus to motivate employees from time to time.

Offering incentives will keep the employee motivated it will also drive them to

generating more business and thereby revenue for your company.”

Mahajan further added that multi-tasking in employees should be encouraged.

However, while in specific projects and in the marketing field one cannot expect

the workforce to multi-task. Areas such as back-office can be explored as an

option to reduce costs in an extensive way. Hence accounts, stores, purchases,

documentation and integration services are the areas where employees can be

asked to perform more than one job role.

“Pre-sales is one area where SPs can ask employees to multi-task by

inculcating more skills. This will eventually lead to efficient and optimum

utilization of manpower,” Mahajan shared.

Echoing similar sentiments, Biren Selarka of Mumbai-based Acma Computers

opined, “While we have said no to salary cuts, increments were something that

had to be stalled in order to control costs. However, at Acma we continued to

provide bonuses to employees from time to time depending on the level/grade and

nature of work of the concerned employee.”

Selarka further mentioned that marketing and services where few areas where

Acma distributed incentives and bonuses to keep the workforce motivated.

Gupta of Darts IT Network stated, “While salary cuts may seem to be the

obvious option at first sight, it demotivates employees and hence at Darts we

did not resort to this option. Employees appreciate when salary cuts are

replaced by multi-tasking.”

Sahred Kotak of D-Link, “Multi-tasking is eminently advisable as it brings an

opportunity to explore other facets/strengths of persons. For example technical

people can multi-task in supporting sales. Finance can multi-task in project

management/complex negotia­tions with customers/vendors.”

Gupta of Intel opined, “By far most organizations treat people resources as

the most critical resources and make best efforts to retain people resources.

Most organizations first look at all other elements before even exploring layoff

as an option.”

Again lay offs is not advisable unless really required. However, some SPs can

look in this direction depending upon the nature of services being delivered.

Stated Bhavnani, “We closed our operations both in domestic and overseas

market. Hence when we were shutting down various offices we did lay off certain

employees while some were moved to other operations. Employees who were hired on

contract basis were no longer needed after the completion of projects and had to

be removed.”

Cutting costs is an exercise that is not very difficult but must be made

after keeping various factors in mind. Every business can look at reducing

expenditure in their own unique ways. However, resorting to the above mentioned

means can help SPs bring down costs even as they eye newer segments for better

opportunities.

Pooja Sharma



poojas@cybermedia.co.in

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