Slimming down your Costs

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.

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.

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.

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.

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.”

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.

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.

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