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How to trim your IT budget without making sacrifices.
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Outsourcing

These days, even companies in nontechnical industries are spending ever larger chunks of their budgets on IT. Last year, companies with less than $250 million in annual revenue spent a median of $6,120 per employee on technology, according to Computer Economics, an IT research firm in Irvine, California. This year, many businesses are looking to cut IT spending. Though there are countless ways to scrimp here and there, experts say the most effective way to pinch pennies without sacrificing technology is to outsource as much IT as possible. Handing off management of tech systems to so-called hosted or managed service providers not only cuts costs but also eliminates common IT headaches. If you want to save big bucks on IT, consider farming out the following functions to someone else.

Stop Tinkering With E-mail

E-mail trouble is the most common reason employees flag down the IT team. An in-house e-mail system requires a robust server. And floods of spam and system crashes can consume hours of technicians' time. Estimates put the monthly cost of maintaining an internal mail server -- including license fees, bandwidth, upgrades, and the staff to run it -- at as much as $50 per employee. That's why many businesses are switching to hosted options from companies such as BlueTie, FuseMail, Everyone.net, and Mailtrust, which can cost as little as $1 to $15 a month per user. Many offer hosted Microsoft Exchange servers so you don't have to get used to a new program, or they offer Web-based programs that look similar to Microsoft Outlook. Most provide around-the-clock customer support.

That's why Air Tractor opted for a hosted e-mail service. The Olney, Texas -- based company, which manufactures and sells crop-dusting planes, needed e-mail for its 50 or so office employees but wanted to avoid the cost of managing it in-house. "We didn't even want to think about hiring an expensive IT guy to keep up with it," says Jim Anz, who manages Air Tractor's data processing. Anz chose Noteworthy, a Web-based e-mail program from Mailtrust with shared calendars and group contact lists. He liked the price -- less than $2 per user per month -- and that he didn't need to pay another company to keep the e-mail free of spam and viruses. Anz was also won over by Mailtrust's guarantee of an immediate response if something went wrong.

AMOUNT SAVED: About $20,000 a year


Use Software on the Web

Whether you call it software on demand or software as a service, the idea is the same: You use software on the Web instead of installing it on your hard drives, and you pay as you go. Salesforce.com and NetSuite led the way with hosted customer relationship management services, but now all sorts of software makers are offering hosted versions of their programs. Even Microsoft (NASDAQ:MSFT), the king of packaged software, has recently taken baby steps toward offering hosted versions of its software, including Office Live Workspace, which allows users to share and view Microsoft Office documents online. (Of course, to edit documents, users must have Office installed on their computers.) Using hosted software saves companies both a hefty up-front license fee and the cost of having techies install and troubleshoot programs. Plus, companies can easily cut back or increase the number of users as needed.

Matt Rissell likes that idea. His company, TSheets.com, which is based in Meridian, Idaho, sells hosted software that helps companies manage time sheets. And Rissell uses hosted applications to meet some of his own company's needs. He figures one such application, Yugma, saves him more than $150 a month. It's an online collaboration tool that includes whiteboards, chat, and file sharing. Instead of Microsoft SharePoint, Rissell's programmers use Yugma -- which costs Rissell $20 a month for 20 users -- to collaborate on their coding projects. He also uses it to host Web-based seminars for his customers around the world. "It's the kind of tool every big business owner has, only it's priced so that a small-business owner can afford it," says Rissell. And he's not locked into a long-term contract, because he pays on a month-by-month basis.

AMOUNT SAVED: About $1,800 a year


Switch to a Virtual Phone System

Another hefty expense and technician time-suck is the company phone system. Instead of plunking down several thousand dollars for an internal phone system -- also known as a private branch exchange, or PBX -- some small and midsize companies are opting for so-called virtual PBX services.

These phone providers, such as GotVMail, RingCentral, Packet8, Virtual-PBX, and many others, offer hosted phone systems that don't require installing or maintaining equipment. For a monthly fee of about $2 to $15 per extension, companies get an internal phone system with a main number, voice mail, and free internal calling. Incoming calls to an extension can be routed to a landline, VoIP phone, or cell phone. Because the equipment is managed off-site by the virtual PBX service, companies avoid paying a staff technician. However, many of the services are geared toward companies with fewer than 100 employees.

Some virtual PBX providers, such as Junction Networks and CallTower, also offer hosted VoIP plans that can lower long-distance bills without the cost of installing and managing an internal VoIP system.

John Fretz, founding partner of IToversee, a Union, New Jersey, company that helps medical offices digitize their record keeping, recently signed up with Junction Networks. Fretz says that by switching from a traditional phone company, he has cut the monthly phone bill at his five-person office from about $500 to $200 -- and he no longer has to manage the phone system. Another benefit, says Fretz, is a function that allows each user to connect a single extension to multiple phones. So when Fretz's salespeople call him at the office, he can have the system ring his home phone and cell phone at the same time. It allows him to work from anywhere, he says. "This makes all the sense in the world for any company with multiple offices or remote employees," says Fretz.

AMOUNT SAVED: About $3,600 a year


Ditch the IT Department

A full-time IT staff doesn't come cheaply, especially when you need skills like programming and network maintenance. Salaries for a senior IT manager average about $91,000, according to a survey by Global Knowledge, an IT training company. Some businesses are ditching their IT departments in favor of outsourced teams. Rather than bill by the hour like traditional consultants, managed service providers often charge a fixed monthly fee, which helps companies better plan their budgets. The downside of working with an outside firm, however, is that you will have to go through a customer service chain to log a problem or request an upgrade. You may also need to wait to get an appointment for an on-site visit. On the other hand, you will have someone monitoring your systems 24/7 to head off problems.

One of the first things Paresh Shah needed when his business, MindLeaf Technologies in Bedford, Massachusetts, took off was IT expertise. MindLeaf, with about 80 employees, helps government hospitals install electronic records systems. Though Shah has an IT background, he still needed help maintaining his company's technology -- from the e-mail server to the phone system. Instead of hiring an in-house IT guy, he contracted with an IT firm near his office. Several technicians remotely monitor his servers, keep his e-mail system up to date with the latest spam and virus filters, and perform upgrades at night and on weekends -- all for about $25,000 to $35,000 a year, less than half what hiring an IT technician would have cost.

Though Shah still keeps his own hardware on-site, he is planning to migrate his servers to his managed service provider's data center, not only for convenience but also for improved security. Because he works with the government, the safer his data are, the better he sleeps at night. "The less I have to worry about my IT systems, the more I can focus on growing my business," he says.

AMOUNT SAVED: More than $35,000 a year

More articles on hosted software, VoIP services, and virtual PBX phone systems can be found at www.inctechnology.com.

Resources

For more on managed service providers, including the top 100 MSPs, visit mspmentor.net.

Last updated: May 1, 2008

DARREN DAHL

Darren Dahl is a contributing editor at Inc. Magazine, which he has written for since 2004. He also works as a collaborative writer and editor and has partnered with several high-profile authors. Dahl lives in Asheville, NC.




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