How Not to Manage your IT Assets
Confused About How to Manage Your Organization’s IT Assets?
Here Are Some Common Pitfalls to Avoid
The inherent complexities of tracking assets are leading many organizations to seek new ways to manage their equipment and high-tech systems. Tracking the cost of ownership for IT assets can be challenging for several reasons. First, an organization’s assets are typically leased, purchased or licensed in significantly different ways. Second, it is complicated to track, manage and maintain equipment that is deployed in a variety of locations to a variety of people. Additionally, it can be challenging to coordinate inventory management with less obvious, but nonetheless essential, issues as the tracking of leases, license terms and conditions, usage constraints, asset interdependencies, maintenance schedules and life cycle costs.
An effective asset management system, coupled with established processes and procedures, will save organizations money almost immediately by helping them avoid paying for things they don’t use and eliminating overpayments for technology and services they don’t really need. By avoiding some common asset management pitfalls, asset managers can better manage equipment, reduce costs, and in turn, provide the best possible service to their clients.
Pitfall 1: Relying on Paper
Files or Spreadsheets
Historically, asset managers’ first attempt to track asset information with home-built filing or spreadsheet systems, which inevitably require considerable time to support, search and maintain. Relying on a manually maintained system diminishes the potential financial returns available with an asset management repository tool that uses a relational database. Because files and spreadsheets are not relational in structure, they have inherent limitations, particularly for large-scale asset management initiatives: Inconsistent, redundant data is inevitable over time. Efforts to locate critical information can be thwarted by such simple inconsistencies as multiple spellings for a vendor or product name (e.g., IBM, I.B.M. or Intl. Bus. Mach.). Whether in files or spreadsheets, if an organization purchases 20 pieces of equipment in a year, the vendor’s name, product name and other critical information must be added 20 times, increasing the chances for inconsistency. Locating data or bringing it together correctly becomes increasingly challenging and thus limits the user’s ability to produce accurate reports or make intelligent decisions. Data analysis and reporting becomes cumbersome. As spreadsheets fill with data, they quickly become cumbersome to use and difficult to maintain. Even when the content is complete, spreadsheets lack built-in functions for generating accurate budgets and forecasts, or facilitating invoice verification. Paper files offer no support for this important capability. No method to gain an organizational view. Typically, multiple spreadsheets are needed to accommodate different classes of assets. As managers enter redundant information across spreadsheets, the risk of inconsistency increases, making it difficult to roll up to an organizational view. Again, paper files offer no facility for analysis.
In addition, many managers who use homegrown approaches to asset management can easily overlook ownership issues that may not be immediately obvious. Addressing such issues effectively through these systems is almost impossible: Manual systems offer no way to track interdependencies between pieces of equipment, or maintain historical records of past transactions or maintenance work in a form that can be accessed or analyzed easily. Spreadsheets and files have no mechanisms for triggering notices for such important decision deadlines as lease terminations, maintenance renewals and deliverable due dates. Managers relying on such systems must integrate yet another tool to coordinate this function, or risk missing critical deadlines. Spreadsheets and files do not provide features to record or analyze the terms and conditions of hard copy license agreements, making it difficult to enforce vendors’ obligations. Neither of these systems facilitate analysis of asset management needs for generating reports and budgets, or proactively planning for future needs.
Profile: CASE Corporation is a leading resource for agricultural and construction equipment, with a broad array of financial products and services. Until just a few years ago CASE relied on filing cabinets filled with endless folders, inconsistently filed and containing dissimilar contracts to manage these assets.
If an individual had a question about the terms or conditions of a specific contract or the financial implications associated with a contract, it would take a great deal of time and resources to answer. "And even when you found the answer, you could never be sure that you were looking at the most current information," explains Doug Sorenson, who handles asset information systems support and disposal at CASE.
After implementing an asset management solution, CASE realized immediate savings simply through invoice reconciliation. "We found we were being invoiced beyond our negotiated caps, and we were able to recover significant dollars from vendors," according to Sorenson. "As we’ve progressed with the system, we’ve also realized the advantages of being able to easily answer such questions as: What are we paying today? What are we going to pay tomorrow? What is the contract going to cost in the future? What is the total life cycle cost of the product going to be?"
Pitfall 2: Relying on a
In addition to general information about capital assets, many organizations’ accounting and fixed-asset systems provide limited information about some IT assets. It is important to remember that accounting and fixed-asset systems are designed specifically to preserve official bookkeeping records, generate income statements and balance sheets, and compute tax liability.
While financial and accounting systems contain line-item information to support complex calculations of depreciation and property tax, they simply do not have the dynamic structure or cost and legal information to effectively manage an organization’s relationships and contractual obligations with hundreds of vendors. IT assets are sometimes governed by complex agreements that, if not properly managed, may subject an organization to significant, undue costs. For example, these systems typically do not incorporate leased assets, and rely on close managerial scrutiny to avoid such errors as depreciating a 286-based system the organization disposed of years ago.
By necessity, these systems are often closely guarded by the financial department, making them difficult to access by department heads who want the data to make financial decisions regarding current and planned technology assets.
Profile: Bank One Services Corp–oration relied on a "mixed bag" approach to asset management. Its financial system tracked the type of assets, but offered no contract or comprehensive asset management functions. There was no automated way to monitor maintenance agreements, leases or invoice reconciliation. "The need seemed obvious," says business analyst Keith Hopkins.
"Even as we initiated implementation of an asset management tool our initial cost-savings were eye-opening," Hopkins says. "We recovered the cost of the system in the first month. Our immediate savings resulted from such simple advances as reconciling invoices, canceling expired maintenance contracts and terminating leases that had converted to high, month-to-month arrangements."
Pitfall 3: Relying on a Decentralized Approach to Asset Management
Many enterprises decentralize asset management, either in an effort to keep local decisions at a local level or as a result of mergers in which acquired subsidiaries maintain autonomy. This approach lacks the efficiencies offered through a centralized IT asset management strategy: Software is purchased at multiple locations, rather than just once, which enables license and maintenance fees to be paid, based on the actual number of applications deployed. Human resources are often utilized inefficiently in an attempt to manage and enforce contract terms and renewals, and maintenance and licensing agreements across multiple sites. Staff resources are duplicated in attempts to manage data, generate reports and budgets, and plan proactively for asset needs. Multiple sites usually do not have the ability to dynamically monitor migration of assets across departments or even to other locations; instead, assets are static from the time of purchase. The enterprise incurs the opportunity costs of not sharing information about the best vendors and contracts available to meet various IT needs.
Profile: Galileo International manages the internationally recognized Apollo Customer Reservation System, deployed by airports, hotels, cruise lines, car rental companies and travel agencies. As the company grew and acquired subsidiaries, it became apparent that the purchasing group would need an effective tool to integrate contracts from its subsidiaries, according to Steve Murley, Senior Procurement Specialist.
Galileo realized savings of up to $100,000 within four months of tracking its approximately 700 legal contracts with an asset management tool. The organization now receives advance notice to renegotiate contracts, rather than being forced to automatically renew with terms that may not be in its favor, according to Murley. Additional benefits include the creation of "virtual contract files," to conveniently access contract data, and the formation of a "corporate memory" that centralizes all contract information in a single repository rather than in the minds of various staff who may be unavailable.
Implementing an Asset
Now that you know why existing options are inadequate to provide a comprehensive and efficient asset management solution, what will work? An asset management repository is a smart solution.
Dedicated asset management tools provide fundamental functions accomplished by the aforementioned systems, while also supporting tasks unique to comprehensive asset management: Track complete lifecycles, from procurement through disposal, of all IT assets, and report back to the financial systems to reconcile and remove assets from the books. Manage cost of ownership, including the complex costs governing IT acquisition, use and disposal, to ensure the enterprise works cost-effectively and reliably in forecasting and budgeting. Monitor maintenance schedules for hundreds of assets across an orgazation. Track pricing agreements to validate invoice accuracy, avoid financial penalties on lease agreements and plan for changes in asset usage. Avoid noncompliance and overpurchasing of assets by managing the complex terms and conditions of agreements. Clarify and enforce an organization’s negotiated rights with vendors. Manage assets individually or by associated software and hardware interdependencies, as opposed to managing groups of assets in line-item form. Track movement and upgrades of IT assets across departments, rather than maintaining static financial information, captured only at the time of purchase. Provide an overview of asset investments by vendor, categorized by cost center and/or department. Avoid the "tribal knowledge syndrome" by preserving all inventory, cost and legal/licensing information in a central repository for use by the corporation.
Cost-Savings are Significant
Organizations that implement comprehensive asset management initiatives use database technology to create a central repository of all cost, inventory, legal and maintenance information. The repository can then be accessed and manipulated to generate timely, accurate and meaningful analyses and reports that enable the organization to: Identify vendor-billing errors through invoice validation. Discover under-utilized or unutilized assets. Enforce advantageous terms and conditions buried in lease or license agreements. Negotiate advantageous maintenance schedules. Create budgets and forecasts accurately and quickly.
Asset Management Becomes Centralized and Dynamic
In addition to managing the cost of ownership for each asset, the repository identifies the user, cost center, supplier, warranties, date purchased, date installed, specific terms and conditions associated with the asset’s use, as well as other information important to the organization. Repository tools enable proactive asset management with the ability to: Generate advance reminders automatically to enable research and decision-making regarding lease terminations, maintenance renewals, service contracts and deliverable due dates. Improve invoice reconciliation with contract terms and conditions to avoid such common errors as inaccurate billing; automatic renewal of service and maintenance contracts, even for expired equipment; and high month-to-month rates on expired equipment leases. Create a corporate overview of purchasing decisions and servicing histories. Manage interdependencies between assets. Facilitate and budget for equipment migrations. Forecast and budget current assets and planned acquisitions. Streamline workflow and free time to manage vendor relationships. Access terms-and-conditions templates online. Store scanned online contract images.
To support an effective strategy of asset management, organizations must have a tool able to build a robust central repository of asset data. As assets are tracked throughout their lifecycles, the contents of the repository become the "corporate memory" providing the only complete picture of the organization’s cost of ownership for its information technology. The scope of organization-wide asset management may seem staggering, but the secret is to start on a limited basis and build as you go.