Wednesday, April 8, 2009

Save Money By Having Options

Today, I had a very clear example about why it is so important to have options in life.  At work, we are looking for every way to cut costs.  In hard economic times, smart companies look for ways to save money.  For many technology companies, the best way to do that is to cut staff.  Having already done that, and wanting to prevent any further cuts, the technology team at my company is trying to find every cost savings we can reasonably manage.

So we looked at the big ticket expenditures and are finding ways to save money.  Some of the most obvious things to cut are software licenses.  These can get quite expensive depending on the software and its functionality.  We had one piece of software which we spent $180,000/year. It was the industry leader in it space, but in reality it was not worth the expense.  The key thing it provided was data and that data was available through other providers for much less (on the order of $1000/year).  Now the data from this other provider was not as detailed or rich, but it suited our purposes just fine so we decided we could easily write our own little server to house the data and nearly completely erase the expense.

The server only took one developer a few weeks to write and we were just a few weeks away from launching this new solution.  We called to cancel the contract with the $180K provider and they quickly responded back with a much sweeter deal; we could continue to use their solution for $1000k/month.   That is almost a 95% reduction in price.  This will save the company almost $168,000, or about the salaries of two software developers.  All this because we had a credible threat to abandon their service.  We decided to stick with this provider for now; the change would have required some more work and a little bit of risks, and the cost savings it would have provided are now not as great.  In tough economic times, this company made the rational decision that it was better to get something from us rather than nothing.

While we are happy with the deal, you have to think, why the heck were we paying so much for so long!

Note:  I was going to link to a post that I had written about why having options is the key to a happy and successful life.  I had written it shortly after I quit my last job and was reflecting on how having the option to quit enabled me to have a better option, my current job.  Somehow I never actually posted that article.  That one will have to come next.

3 comments:

  1. Your favorite topic on forbes.com - 10 most taxing states. California doesn't make the list. Huh? Is there analysis wrong?

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  2. THEIR analysis.

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  3. I am not sure what is going on here. It might just be the way they are calculating tax burdens.

    Also, you need to realize that the tax burden is not distributed uniformly. California has a lot of people. Any large group is naturally going to smooth out any extremes. The problem with California is that there are a few people who have very large tax burdens and a few people with absolutely no tax burden (and probably have a negative tax burden, they are subsidized by the government).

    People with good paying jobs like yourself or myself bear an inordinate tax burden while others pay very little. This nets out that "Californians" on average do not have a high tax burden.

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