Low Hanging Fruit – Really?

The Oxford dictionary defines Low Hanging Fruit (LHF) as “a thing or person that can be won, obtained, or persuaded with little effort”.  To those of us in the IT/Telecom auditing business, that thing means money in the form of cost reduction or cash recoveries that can be significant.  It’s not uncommon to believe that LHF opportunities exist and they most probably do.  However, don’t be fooled by the definition, not all LHF is that easy to reach.

Over time, our practice has uncovered various LHF opportunities that cover a broad range of expense areas.  On the IT/Telecom front, we have found that most, but not all, are related to:

• Traditional wired and wireless individual, networked and enterprise telecom services
• Equipment maintenance, licensing and maintenance
• Data center rental and associated charges
• Outsourced help desk and other staffing services
• Other IT/Telecom items that incur recurring costs
• Uncontracted/pending capital expenditures

To us, it’s never a question as to whether there is any LHF, it’s just a matter of validating them and systematically working through elimination of the underlying cause and recovering the identified reward.   Our track record in doing this type of work for more than 30 years has consistently produced results that more than justify the effort.  Yes, there have been situations where opportunities have been limited, however these have been the rare exception.

Having done hundreds of audits and based on the results of current audit initiatives, we continue to realize significant LHF opportunities in the following areas:

1. Erroneous recurring service charges and/or licensing fees
2. Recurring charges for services no longer in use or needed
3. Noncompetitive service charges that can and should be competitively re-bid, re-contracted and/or replaced
4. Inefficient designs that can be optimized in a manner that reduces costs while maintaining, if not improving, service levels and functionality
5. Erroneous application of service fees, taxes, surcharges and/or other contractually allowed, but questionable penalties and/or early termination fees
6. Inefficient use of internal and/or outsourced third party support organizations
7. Inaccurate inventories that overestimate cost bases
8. Unaudited capital and third party projects

If you think there may be opportunities in these or other areas, it’s best to take a series of measured steps prior to taking action.  After cataloging the opportunities, it’s prudent to perform an exhaustive review of all services to establish a complete service baseline.  This first step should help you identify any interdependencies that will then need to be evaluated further to determine if action on the LHF will negatively affect the other interdependent service.  Once the baseline is scrubbed to account for any LHF disqualifiers, it is also prudent to review and confirm the baseline and planned LHF actions with management to confirm that the planned actions are consistent with organizational near and long term business objectives.

I know, this really doesn’t sound that easy and, if you do it right, it’s not.  There are some that just reach for the prize without consideration of the longer term ramifications that can be significant from both a service level and financial perspective.  We are occasionally retained by clients to correct situations caused by over exuberant auditors whose only interest was the immediate short term lure of LHF.  Sometimes these situations can be difficult and costly to correct.

Based on our experience, seizing LHF opportunities the right way always turn out to be a positive experience.  Aside from the obvious financial upside, our well defined and detailed process give our clients confidence that their on-going spending levels, upcoming capital outlays and budget trends have been validated and confirmed by a third party.  Stabilizing spend levels as soon as possible can help salvage an IT/Telecom budget and put you in a better position to predict future spending levels; both positive results with virtually no down side.

The lesson here is that realizing the benefit of any LHF may take some effort and can potentially be minimized, if not evaluated properly.  Before acting on any LHF, you should first confirm that:

1. The target is real. If possible, take preliminary/temporary actions that test its validity.
2. The service to be eliminated won’t be needed within the next 6 to 12 months. While keeping unneeded services until they are needed may be costly over the long term, the cost of reinstalling the service in the near term may be more costly.
3. Any underlying contract commitment levels won’t be negatively impacted.

While obtaining LHF may not be that easy to achieve, it is likely that some level of LHF is present in your organization.  Your ability to reach the objective and reap the benefits can be enhanced by looking beyond the obvious and taking the time to take the appropriate, not reactive, action.