CIO Challenge: Maintenance Costs
Outsourcing is another way that firms are keeping maintenance costs in check. In fact, Richardson Partners Financial relies on the strategy. Stan Eng, senior vice president and chief technology officer, says that, in starting from scratch, the firm "made a conscious decision to buy versus build." That includes using an application service provider (ASP) for its portfolio-management system from Montreal-based Croesus Finansoft.
Scott Stennett, vice president of technology at Richardson, says that if Richardson had built the portfolio system itself, it would have had to swallow the costs of upgrades and maintaining the system. By using an ASP, it spreads the cost of maintenance across the ASP's customer base, making it cheaper for Richardson to maintain, he says.
When it comes to leasing software, "due diligence and negotiating a good contract are critical to controlling future software costs," Delaware's Ball notes. "Many, if not most, software vendors have gone more to a lease model for their software. Contract negotiation is key. Figuring out the necessary customization ... to the software before it is leased gives you a chance to negotiate when you have the most leverage."
If You Build It ...
Mellon's Woods says that, for those who opt to build versus buy, maintenance is also a reflection of how well a firm develops its software at the initial stages. To guide it on that front, Mellon has adopted the Software Engineering Institute's Capability Maturity Model, a five-step framework for measuring and improving an organization's software development, for developing applications. Woods notes that when you have fewer bugs, there are fewer issues downstream. "The model really leads you through best practices for developing software. Among other things, it's a cleaner system that requires less maintenance," he says.
Ameritrade's Hirji adds that broken applications are one of the maintenance sticking points, especially with the number of security patches that some software developers issue. Each patch can cause a malfunction somewhere in the system. The challenge, he says, "is in managing and removing the complexity. The more complex an environment is, the higher the maintenance is going to be. We try to take out as much of the complexity as we can. We don't have monster monolithic applications."
---
Maintenance Mends
Experts say there are a few things that firms can do now to cut their maintenance costs.
-Consolidate servers. "One of the most efficient cost reductions has been server consolidation," says Rob Hegarty, vice president of the securities and investments practice at TowerGroup. "You can go from multiple systems that perform the same thing down to one or two systems." That's particularly the case for investment firms that have recently gone through a merger-and-acquisitions spree. "There's a lot of waste and duplication."
-Consider outsourcing. Outsourcing is high on the agenda for reducing maintenance costs. As applications get older, they become harder to maintain. By outsourcing new development, Asiff Hirji, CIO at Ameritrade, says, "The natural effect of that is a lower cost of maintenance.
-Examine maintenance contracts. Consolidating or eliminating office equipment can result in significant cost savings. Stan Eng, senior vice president and chief technology officer at Richardson Financial Partners, says that "one of the things that's been a sore point for me is color printers." He says the cost of maintaining them can be almost as much as the printers themselves. "We've been getting rid of some of those devices" and electing not to go with maintenance contracts, he says.
The bottom line, says Hegarty, is that when firms are "looking at maintenance, the big goal is to reduce costs without reducing the service level - you have to be very careful not to throw the baby out with the bath water as you try to reduce costs." It doesn't help to reduce a budget by 4 percent if the system is down five times a week, he says.
Tweet This