Believe it or not but controlling IT expenditure isn’t as easy or as straight forward as you might think. Sure, you can keep receipts of everything you buy. However, unless you have got someone who is experienced enough to step back and calculate its return on investment – as well as assess its infrastructure – then determining if they are worth the purchase can be hard.
And herein lies the problem…
How can you find the perfect balance between increasing business efficiency, maximising your return on investment on these pieces of software, and ultimately reducing your overall IT costs?
Well, the first step is being able to understand your IT spend and why it is important to decrease it in the long run.
Why reduce IT costs?
One the biggest expenses your organisation will ever face is IT. From installing the latest software to implementing digital tools/tech/apps to improve employee productivity, turnovers and time management; you will find traces of IT at every level of your business.
And this is not surprising when you consider that we live in a digital age where IT is the driving force behind digital transformations. It is no longer simply a platform that can help organisations to run their businesses. IT is now what keeps your business moving forward and binds it together.
Combine this with the variety of new products, services and opportunities that are constantly arising across the market (in a bid to improve consumer engagement and connection), and it is little wonder that IT costs are rising. In order to compete, we are spending more – as seen by Gartner’s report. In 2019, global IT spend was approximately $3.18 trillion – 3.2% more than 2018!
So what can you do? How can you bring these IT costs down, when you’ve got so many tasks and responsibilities to deal with? How do you prioritise one over the other? Especially when many of these costs appear to be fixed.
Well for starters, IT costs are not as rigid or as fixed as you may think. They CAN be changed.
Next, you need to remind yourself of all the benefits you’ll acquire from implementing these reductions:
1) In the long term you will save money – to remain profitable you cannot let IT become a money pit. This means, you don’t have to invest in every new piece of tech. Instead, by researching them thoroughly first, you will be able to determine if they are compatible with employees and whether they’ll assist you in fulfilling your business needs.
2) By learning how to reduce IT costs, you will have the flexibility to allocate this budget to other areas of your business – enabling it to expand, grow, and deliver a better service i.e. offer more to your customers.
Get this balance right and it is possible to reduce your IT spend without having to sacrifice your level of service, quality and innovation.
Where can you normally reduce IT costs?
Remember that balancing act we referred to earlier? Well, it is possible to have the best of both worlds. The trick is knowing where to cut back.
Below are some suggestions of where you can improve the cost-effectiveness of your business’s infrastructure, and in turn lower your IT costs:
- Telephone systems – are you getting the best deal from your provider? Is it the best package? Or could this service be automated and be dealt with by chatbots?
- Software, hardware and tools – are all of them necessary or have you bought them simply to stay on trend? Can they easily be integrated into your business, or are they un-compatible with your employees, and as such are being underused/ignored for old practices?
- Workflows and processes – are you using the most efficient processes to complete client tasks, or is there a faster way to get the job done? The longer you spend on a project, the more time and money you’ll waste.
How to reduce IT costs
Choose new service providers or tools
1) You need to ask yourself – are you really getting the most for your money? Likewise, are the services you’re receiving from your current provider the best on the market? If you are not 100% certain that they are, then you have got two options. You can either start shopping around for a better price, or you can try to negotiate a new deal where you get: 1) a reduction in price or 2) a higher level of service.
You’ll quickly find that in a bid to beat their competition – and retain your custom – your current provider will be more than willing to discuss a new deal.
2) Another route you can explore is reviewing your existing tools, and seeing which are useful, which are dated and where you need to invest in new products. True, you want to save money, but sometimes you have to spend a little to cut costs in the long term.
Cloud storage – and its services – are a prime example of where you can effectively cut costs and benefit from a more versatile service.
You see, instead of having to store everything onsite – and having to own said onsite storage solutions/infrastructures – cloud storage allows you to store data remotely and rent this space. And in doing so, you can instantly reduce your IT (CAPEX and OPEX), licensing, monitoring, maintenance, staffing and security costs; as they’ll be completely handled by your cloud service provider (for a set, cheap and regular monthly fee).
At the same time, you can escape onsite storage limitations – as many cloud providers offer unlimited storage options – and benefit from easier accessibility; improved performance, and better scaling.
According to TSO Logic, after analysing 50,000 operating system instances, they found that 45% of those instances were 36% more cost-effective on the cloud. In fact, by using the cloud they saved an average of $5.6 million annually.
NOTE: if you do go the cloud route, just make sure that your cloud spend is optimised and that you’re only paying for the resources you need, and not for any unnecessary extras.
Another option, is to consider using open source software. Not only will it eliminate the need for you to keep on acquiring software (and paying reoccurring annual maintenance costs); you will also have direct access to the source code, enabling you to make your own modifications and tailor it to your needs.
In fact, it benefits from regular code updates (by developers from different companies) so you don’t have to spend any time updating it yourself. Instead, they will support and implement it all for you.
Alternatively, you can make the conscious decision to do things right (when it comes to your hardware, software and coding), and make sure your employees aren’t dealing with outdated and/or multiple versions of the software/hardware.
By checking to see if they are compliant with the architectural roadmap – and automating your regression tests – you can save money and improve their quality.
3) Your third option is to try developing your own tools internally. So instead of paying to use someone else’s tools, why not try creating your own? By developing your own version, you can tailor these tools to meet your exact needs, making them immediately more cost effective as nothing about their design is wasteful.
Outsource roles to save on permanent employee costs
FACT: according to Enterprise Systems Journal, outsourcing your IT staff can save you 25-40%.
Now, this trick is most useful to small-to-medium sized businesses, as outsourcing can help to minimise some of your IT costs – especially if you’re utilising cloud storage. Adopting an MSP (Managed Services Providers) model for instance, allows you to pay for remote IT services such as applications management, desktop and network management, offsite help/support desk and backup data recovery, but only as and when you need it.
In fact, you will only be charged for actual capacity and usage (instead of the traditional upfront costs you’ll face when buying an onsite infrastructure and paying multiple staffing salaries).
Before you jump on this tip though, we must give one word of caution – do not view your budget for these external contractors as separate. A mistake many businesses make is viewing outsourcing as separate, and not placing it under the same scrutiny that you would onsite. As a result, you risk overspending or spending more on an individual contractor than you normally would. For this reason, you need to carefully track how many outsourcers you use, how much you pay them and how much overtime they are doing.
Likewise, not all roles outsource well. True, it may cost you less to pay someone in a different country (upfront); however, this may prove costly in the long run due to instances of miscommunication or them simply not having the same skillset as someone inhouse.
Because of this, we recommend that you only outsource when appropriate, as cutting costs this way could also place yourself in a situation where they have cut corners (to get the job done quickly and cheaply) and in doing so, have created bigger problems.
Now, if outsourcing is not an option and you need to hire someone inhouse permanently; then it is still possible to save money by making sure that they receive all the relevant training and certifications. From sending them to tradeshows or to seminars and training sessions; they will be able to handle any problems that may arise before they get expensive.
Audit your systems and processes to identify where time and money is being wasted
Whilst some things have to be outsourced/assigned to a person; you might find that some of your processes could easily be automated – eliminating the need for a person altogether.
To help identify which of your systems and processes are causing both time and money wastages, we recommend giving them an audit and asking yourself the following questions:
- Are there any processes that could be automated and handled by a machine or AI?
- Which is cheaper – investing in software that can automate the process, or allowing your employees to continue doing it manually?
By asking yourself these questions – i.e. performing this audit; you can take a positive step towards improving your business efficiency.
And this is essential given that we live in a digital world where customers expect results here and now. They have no longer got the patience to wait around for a response, and in their wake, tech – that is dedicated to automation and machine learning – has risen in popularity.
And it is easy to see why, given that these tools can now complete complex tasks on your behalf. By allowing AI to complete these generalist tasks, this gives your employees the freedom to focus on more specialist tasks that can bring value and money to your business.
For instance, instead of wasting time with generalist tasks that could easily monopolise an IT professionals time e.g. resetting passwords, refreshing IT equipment (printers) and sharing folders with clients/colleagues; with the right automation tools (chatbots, algorithms, etc.) you could prevent incidents/service requests, and save money on these simple jobs as they will handle them for you.
Another question you need to ask yourself is – are you using all of the features that are currently being supplied by your service provider? If you’re not, then you could save money by choosing to use a cheaper provider who only charges for the features you use/need.
Alternatively, you can try combining your work, so that you only use one tool (that contains lots of features) rather than having multiple tools which have limited features.
Now, should you find all of your tools are necessary, then there are other techniques you can use to save money:
- Use cheaper hardware – if possible run applications on cheaper devices.
- Decommission software – whilst negotiating new software agreements, use this time to assess which pieces of software you actually need, and which can be decommissioned. If it is expensive yet performs a small function, then look for an alternative solution.
And these strategies are just the tip of the iceberg of the many various ways you can reduce your IT costs. However, if you’re struggling to make a change because of limited IT resources or a lack of knowledge, at Economit we can help. Alongside helping you to audit your systems and identify areas for cost reductions, we can also help you to find the best solutions for your business and budget.
Contact our team of professionals today and take your first step to keeping your budget in check.