As the tech recession continues to affect companies across the globe, organizations are looking to cut costs wherever they can. Even tech giants have resorted to mass layoffs to absorb the hit. For smaller companies, the cost-cutting may find its way to tech departments.
However, reducing IT costs can be challenging because tech expenses can appear tied to critical business operations. The best tech suite possible allows businesses to provide customers with optimal products and services. Undoubtedly, reducing IT costs is a tricky balancing act.
This article aims to provide practical and actionable steps to achieve more cost-efficient IT operations.
Tips For Reducing IT Costs
When it comes to reducing IT costs, not all sound tips will be applicable to every organization. Take a long hard look at your organization and cherry-pick what applies to you from the list below.
Cost Optimization > Cost Reduction
Before you look around your IT department to see where you can shave costs, get into the mindset that cost optimization is better than cost reduction. It’s easy to cut costs by pivoting to a remote work setup or letting some employees go. When optimizing costs, see if you can make adjustments to current expenses.
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As such, conduct an audit to see which processes can be optimized. For example, instead of subscribing to fixed plans for different tech services, look for managed service providers (MSPs). These companies provide managed IT service pricing, offering payment plans based on scale, capacity, or usage. The pay-per-use approach MSPs offer allows you to maintain the services you need at more cost-efficient pricing.
Align Business Strategies With IT Spending
Every cost-cutting move should be aligned with business needs, with IT spending focused on critical business objectives. If you find any IT-related activities designed for more long-term outcomes, you can postpone them in favor of those with short-term returns.
This strategic analysis will require a thoughtful audit of all ongoing projects and business strategies. Projections will likely need to be shortened to find areas where costs can be optimized or reduced. This will also require alignment across teams and departments, finding ways to support prioritized objectives from an IT perspective.
This approach enables the organization to reduce costs without compromising crucial areas of operations. A thorough review of business strategies might also entail making tough decisions.
Manage On-Premise Infrastructure
One of the more obvious solutions to optimizing on-premise infrastructure is to migrate what you can to the cloud. Cloud service providers can handle IT support, maintenance, and security. Having these on-premises entails costs and takes time and energy from your IT team.
With the wealth of cloud service providers, there’s no need for hardware and storage to be on-site. As well, the cost of renting can be much lower than owning, as you only pay for what you use (similar to MSPs).
Use Open-Source Software
Pivoting to open-source software offers multiple benefits to companies looking to cut costs. Apart from avoiding the initial costs of acquiring software and the requisite annual fees, you can also tailor it specifically to your needs.
Additionally, open-source software gets code updates from developers using it. This means multiple parties are invested in making it better. And, when you come across issues, you don’t have to rely on a single software provider as you can crowdsource assistance.
Improve Workforce Management
Reducing employee turnover in your IT department can be an understated cost-cutting element. The costs of recruiting and onboarding employees are significant. When tightening your belt, it can be easy to drive employees to be more productive, leading to unreasonable workloads.
If you can’t avoid adding to the workload, clearly communicate why employees need to do what they’re asked of. And when they do go the extra mile, make them feel appreciated and valued. Sometimes, simply recognizing performing employees can go a long way.
Additionally, look into creating an internship program focused on undergraduates looking to get experience. Interns can take care of more straightforward and repetitive tasks. This frees up IT staff to focus on business-critical endeavors. Developing a relationship with local educational institutions is a great way to make this approach sustainable.
Outsource With Care
Outsourcing has been a go-to strategy for cutting costs. Some functions can be effectively performed offshore at much cheaper rates than hiring local talents. But before you go this route, make sure you’re not just looking at the numbers.
For example, if customer support is 60% cheaper offshore, it doesn’t always mean that the company is saving 60 cents on the dollar. Disgruntled customers due to the language barrier or miscommunication can end up costing the company more than localizing support. When you move specific operations offshore, travel costs and other related expenses are often overlooked when calculating ROI.
Instead, look at MSPs as an alternative to setting up offshore teams. MSPs can provide services related to areas that include:
- Application management
- Network management
- Remote help desk
- Backup and disaster recovery
Some MSPs even offer pay-per-use models, which could be more cost-effective depending on your organization’s needs.
Before you think about implementing any of the tips above, it’s best to consult your CFO, as it’s their job to save the company money. Consulting with the CFO provides insights from the financial point of view, providing an objective evaluation of potential savings. This will help narrow your options to the most optimal courses of action.