Let me give you two extreme examples that I discovered with the last company I joined as their new CIO.
The time frame is October, 1999, , , leading up to Y2K. Remember how uncertain it was?
Once I got there I conducted a quick IT assessment, something I’ve done dozens of times for company acquisitions and a few times as a new CIO or consultant.
In the discovery I found two things that almost shocked me, , , but over the years I’ve learned not to be too surprised by what you see.
I discover we are paying $950.00 per month to a local company to host our company web site. This web site is approximately 15 pages and information only, no special functionality, , , and we maintain the web pages ourselves.
WOW – $950.00 a month to host our web site, , , what a great deal !!!
WRONG, , , we are getting ripped off. A service like this shouldn’t cost more than say $25.00 a month for what we are needing, , , even in 1999.
This same local Internet hosting company also provides PCs for our Headquarters office which has about 120 people.
A problem I detect is that “new PCs are breaking” plus the PCs we are buying cost us about 20% more than what I can buy the same configuration for from Dell or Compaq at the time.
This company also provides a maintenance service for all of our Corporate Headquarters desktops, , , something we need because we have so much breakage. They only charge us $50.00 per month per device for an all-inclusive maintenance package that includes parts and labor.
Let’s see here, , , how much is this costing?
- 20% more to purchase the PC
- $50/month or $600/year to maintain the PC
We are spending over $5,000 a month with this vendor just on PC maintenance plus paying more for “new PCs” than what we could buy them from Dell.
What’s going on here?
Our company is being ripped off.
This vendor is selling us PCs made up of used parts (it’s why they break within a year) and then selling us a maintenance package disguised as a premium support service.
Well, I quickly fired this vendor, , , hosted our Internet web site myself, developed a standard PC image with Dell and created a purchase contract with them that indeed cost us less money to buy new PCs, , , and our warranty was great, , , and the new Dell PCs didn’t break, , , and we eliminated the monthly PC maintenance cost.
I saved the company roughly $100,000 a year simply by identifying a couple of “abnormal” expenses.
We were getting ripped off to the tune of somewhere between $8,000 to $10,000 a month by this vendor.
When I fired the vendor, I was a bit surprised as to why one of our Accountants got so upset. Turns out he was getting some of the money from this vendor. That’s usually the case when such a rip-off is occurring.
“It takes two to tango”, they say. My take is that I like saving the money and receiving value for what we are spending with our vendors.
Do you have any “war stories” to share? If so, Leave a Reply!