Playbook: IT Cost Reduction Strategies for Economic Downturns

Identify cost outliers by benchmarking IT spend per employee across business units. The cost of recognizing an employee’s contribution is quite small but the impact can be huge. Many IT organizations are top-heavy with personnel which is something that just happens over time. While having experienced people makes it easier to get the work done, it is suboptimal from a cost standpoint.

We offer outsourced services that scale to your needs, so you don’t overprovision or under-provision your in-house team, both of which will cost you in the long run. Establishing a solid partnership with your CFO, CIO and other IT leaders is critical since this group often leads the charge to reduce business expenses and identify cost-containment opportunities. While IT cost reduction strategies are in motion, ensure everyone has a seat at the table to share goals, address challenges and review solutions together throughout the process.

  • Unless payments can be recovered or prepayments returned, the most immediate impact will be on unspent or uncommitted payments.
  • Apart from the evident pricing advantages, such solutions also give you more flexibility.
  • A cost reduction strategy is a plan you implement to lower the cost of doing business.
  • Downtime affects the entire business operations, leading to a loss in revenue, customer dissatisfaction, and brand damage.
  • Plus, you may need to purchase specialized security hardware and hire multiple employees.

Virtualization hosts multiple virtual instances of an operating environment on the same machine, reducing the number of physical servers needed. Data Center Automation reduces the need for manual configuration and processing. These strategies can serve as a working template for anyone looking to decrease their own M&M costs. Work with your finance partner to obtain a solid view of the expense-level detail, such as expense accounts, and key balance sheet accounts, including expense accruals and prepayments. Use this view to identify specific cash reductions that will immediately have an impact.

The Real Reason Why IT Cost Reduction Fails

AIOps correlates disparate data and derives insights that diagnose and resolve the issue faster, resulting in dramatically reduced costs. Additionally, predictive analytics uses machine learning algorithms to study past incidents and identify trends that are signs of an imminent outage. Since cost optimization is one aspect that every organization looks for, here are a few powerful IT cost reduction strategies and ideas for enterprises. With all the amazing benefits, cloud solutions can reduce your IT budget by up to 15%, on average. Small to medium businesses benefit most from cloud adoption, with IT cost reductions up to 36%.

IBM says itsaves up to $543every time it purchases a Mac instead of a PC. That’s because the residual value for Macs is higher in the long term. If you want to create an excellent plan, you might ask for help from your accountant or finance team. They’ll have more knowledge about the expenses that most affect you so that you can meet your financial goals. Perhaps the most obvious benefit is that it can help to increase your profits.

While the focus of many CIOs is and should be on bringing technological competitive advantages to the business, cutting unnecessary costs is always something to keep in mind. Here are six cost reduction strategies that allow IT departments to use more of the budget for new technologies that foster business growth. Prioritize investments by run, grow, and transform to identify projects to suspend or restructure in order to reduce operating costs and reallocate resources. Explicitly delegate and report run costs in the financial plan so the impact to specific cost centers is obvious on subsequent years’ budgets. This one is hard to justify with tangible numbers but there can be huge savings by taking the time to do a few things right.

Tom Nolle is president of CIMI Corporation, a strategic consulting firm in Voorhees, NJ. His projects have taken him all over the world, and into nearly every network technology. In exchange for a contract extension or another incentive, your suppliers may be more than willing to give you a better price. Try to be flexible during negotiations to encourage your suppliers to want to help you. One strategy is to improve your company’s culture to make it a more appealing place to work. Good work-life balance, the opportunity for advancement within the company, and access to training are appealing parts of company culture you could encourage.

Use cheaper hardware

By reducing your overall costs, you’ll be able to increase your bottom line and boost your profits. Another way is to streamline processes and procedures to make them more efficient. Another one of the best expense reduction strategies is to get rid of the offers that aren’t making a good profit. While you’ve probably calculated your overall profitability, break it down by product or service. One of the more contentious options is to lower employee pay, but you should expect pushback. If you can afford it, you can also take a pay cut yourself until your business revenue increases.

Courtney is an experienced Account Manager with Raise specializing in Financial and VMS clients. She prides herself in providing each and every client with the proper time and dedication to produce the best possible results. When she is not eating, sleeping, and breathing IT staffing, she can be found at home playing with her mini Australian Shepherd, Ivy. You could also use the bids you collect to re-negotiate with your current suppliers. If suppliers weren’t willing to negotiate previously, seeing bids from competitors could encourage them to start.

IT cost reduction strategies

Most of these issues represent simple oversights where companies have grown, teams have evolved, and personnel have changed over the years. If you find that it’s too big of a project to do manually, consider an SAM tool. The cloud will also help make extended remote work a possibility (which we’ll talk about shortly), because you don’t need as much personnel on-premises for maintenance and up-keep. Several platforms have sprung up in the last decade that let people who are non-coders also to easily learn and build web and mobile apps through a visual platform with writing minimal lines of code. Many such platforms have a visual builder that lets its users drag and drop to create forms and screens.

Engage with Local Suppliers

If you have enough staff to cover your busy periods, you’ll have too many during slow periods. You’ll have to keep paying your IT employees, even though there’s nothing for them to do. If you have enough employees to handle the slow periods, they’ll be overworked during busy periods. Some cost savings can be achieved through operational efficiencies, while others may require investments in new technology or process improvements.

It’s no wonder so many companies are adopting cloud solutions for their IT needs. Instead of hiring and firing with the tides of business, consider using contract staffing. Maintain enough personnel to handle slow periods and use contract staffing to fill gaps during busy times.

IT cost reduction strategies

No-code development suits such founders, they can quickly roll out apps and features to test out markets and onboard their early customers. As long as clear documentation and training are in place, people can address many of their own needs without assistance from a top-level IT professional. When shifting in-house work to consultants and contractors, you only contract for the work you need and the contractor/consultant is no longer on the payroll after the project completes. Setting the expectation that all replacements will be one level lower than the person who leaves is an easy way to keep your organization in line.

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Finally, cost reduction programs can be difficult to sustain over the long term if they require widespread changes in company culture or procedures. Additionally, cost reduction efforts may fail if employees resist change or managers do not fully support the initiative. Without a clear plan, it can be difficult to identify areas where costs can be cut and to track progress towards goals. Another way is to streamline the production process to make it more efficient. If you’re paying for both services, consider switching to something like ClickUp, which handles both tasks. Then, you can still communicate with your team and track the status of different projects.

IT cost reduction strategies

However, a contractor can be an excellent choice for a short-term project. You only need to pay them for their time working, and you don’t have to cover employee benefits or payroll taxes. Another option for reducing costs is to eliminate unnecessary business travel.

Outsourcing your software maintenance

The goal of IT budgeting is to ensure that the organization has the necessary funds to meet its IT needs while also remaining within budgetary constraints. Furthermore, many service providers put a team of expert staff at your disposal. A fault in your computing or networking can easily hamper your company’s output and cost you thousands of dollars in lost productivity. It is crucial to choose a provider with support specialists who are available at a moment’s notice. Unlike some customer service providers, we don’t lock you into fixed contracts that you can’t escape from.

Switch to low-code for faster, low-cost software development

When a new project approaches, a technical recruitment company can quickly find contractors for you. This flexibility can help you keep your personnel costs under control. Then, you’ll be able to see greater profits, which could help you develop new products and services to help grow your business. A cost reduction strategy is a plan you implement to lower the cost of doing business. For example, you might switch to a cheaper manufacturer to save money on producing the products you sell.

But all 80 said that they had already taken steps to cut both tech support costs and carrier service costs, the latter by getting competitive bids. As a result, only 17 of the OPEX-conscious group had any ideas on how they could impact costs in this area. Licensing fees can be expensive, and some top CIOs are switching to open-source software to save money. Open-source software is usually free, so you can save money on licensing fees.

This is especially true when an enterprise IT organization doesn’t have the specialized workforce they need in certain areas, such as network management. Using an MSP is also cost-effective when a company only has enough work to warrant having a specialist to manage it part-time. According to Computer Weekly, 56% of enterprise IT decision-makers surveyed felt pressured to adopt a supplier’s cloud strategy. There is a need to rethink these transactional associations as partnerships. In 2017, at an ITAM Review conference, Jochen Hagenlocher of Novartis stated that “90% of audits can be avoided through smart contracting, relationship management or if you purchase early.

Benefits of Tightly Coupling Service Desk to Endpoint Management

They allow for easy resource upgrades to better adjust to your business requirements. It is crucial to choose a cloud provider that can help you build the right platform to meet your needs. In addition to outsourcing IT staff, companies can outsource infrastructure components on a pay-per-use model. Such an operating model enables businesses to access various advanced services and technologies. Security as a service, Disaster-Recovery-as-a-Service, and Backup-as-a-Service are just some of the solutions that bring advanced IT an affordable price point. Indirect procurement optimization requires a close analysis of an organization’s internal processes and spend.

Standardize the IT infrastructure.

Perhaps the best way to implement self-service options is by creating an in-depth, well-organised knowledge base. A knowledge base is essentially an online library of content about a product or service, allowing your customers to search for the answers to their questions without assistance. Artificial intelligence or machine learning platforms can accelerate breaking down divisional information silos, aggregating spend across the enterprise under one unified view.

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