Reduce IT Cost, Not Talent, at a Time of Disruption

You can now make use of the best remote teams who will charge you very low as compared to what you may be spending on maintaining your in-house employees. This is much more risk-free as compared to hiring as a contract can be terminated any-time if you have a feeling that things may not be working out. By implementing some of these cost-saving strategies, your organization will be able to free up more funding for innovation that will, in turn, drive business transformation and growth. Check out our IT Budgeting Checklist that can help you with your budgeting process.

IT cost reduction strategies

Find a local college you like, develop a relationship with the placement office, and recruit there consistently. Apply the market forces of pricing and billing to encourage business units to right-size their consumption of IT services and resources. AWS Compute Optimizer and Cost Explorer monitor, analyze cost reduction strategies and optimize your cloud costs. Many midsize to large enterprises invested millions of dollars into enterprise WAN technologies such as MPLS. For instance, a CIO might pay a software provider a modest upfront fee upon deployment, with the remainder due only when the promised business benefits materialize.

How to save on IT-related human resource costs

However, even nondiscretionary “run the business” expenses, such as IT infrastructure and operations, can be cut by reducing usage or service levels. As a leading digital agency in Philly, Dignitas Digital helps its clients with expert solutions on how to reduce costs through our cloud services. Further, there are instances when we have optimized server performance so that the client can achieve optimal usage of resources, thus, reducing unnecessary costs behind server usage. How can IT leaders ask their teams to do more with less while pursuing cost-reduction strategies and ensuring critical operations remain intact? A fully staffed, robust IT team can take on many responsibilities, but IT leaders are finding it increasingly difficult to maintain such a workforce with widespread talent shortages. The lack of time, budget, resources and capacity limit IT leaders’ abilities to meet changing demands.

IT cost reduction strategies

The process is alternatively known as IT cost optimization as it contributes to savings and reduces the size of the IT budget. It also helps in reinvesting into new IT infrastructure or new technology to boost business growth. The third cost reduction strategy IT architects and business leaders can use is to negotiate contracts with SaaS products and other IT suppliers. By working with vendors to eliminate unnecessary spend and services, businesses can negotiate contracts to reduce costs.

Productive employees, in turn, will help the businesses cut costs in the long run by achieving more. But alongside these tools, there is also a lot of productivity and collaboration apps like teams, calendar, SharePoint, OneDrive, etc. So while you are paying for Microsoft Office 365, you don’t need to pay and use other similar services like slack which is a team collaboration tool that has the same features as Teams. The same goes for other subscription services like GSuite or Zoho One.

Outsourcing Security Services

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. Discretionary spending, such as for new projects, additional capabilities or services, is often a seemingly easier place to cut.

  • The remaining work will stay in core play, but much of it will shift to a more agile way of working, bringing IT and business leaders together in cross-functional teams.
  • If you find that it’s too big of a project to do manually, consider an SAM tool.
  • This includes renegotiating contracts and costs with manufacturers, software resellers, distributors, and system integrators.
  • And without leadership behind the strategy, change management will be a real challenge, and your efforts will be short-lived.
  • The process of recruiting and training employees involves time, effort, and certain costs.

Consider also setting a budget for production costs and other business supplies. Then, you can look for the best deal to ensure you get the supplies and products you need. Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. If you persevere, however, the savings with levers C and D can be enormous.

IT Cost Reduction Strategies

Identify usability issues, discuss UX improvements, and radically improve your digital product with our UX review sessions. It’s a win for employees, because many prefer the option of working from home—with all the personal benefits that come with it. Recently, 60% of American working from home said they would like to stay there as much as possible, even after companies start to reopen. Though this option might not be possible for all teams, it’s one worth considering. If you don’t already have one, create an inventory of everything you buy and from whom. Maintain a document or spreadsheet with vendor names, products, and quotes.

IT cost reduction strategies

And remote workers tend to be happier and more productive than office workers. The cost of recognizing an employee’s contribution is quite small but the impact can be huge. When looking at most IT budgets, personnel costs are often the predominant expense. Fortunately, there are many strategies for reducing labor costs and I will discuss these in the first section of this post. But, there are other costs which can be reduced as well and so I have added a second section to deal with these less obvious opportunities.

The tech giants are leading the way, but as of April 2020, about one in five companies were already talking about how to expand remote work options. If your state and/or your company are starting to plan for re-opening, conduct a careful audit of what your remote IT team has done well. Consider keeping the team remote, except for those situations where they really are needed in-person.

ways to reduce your IT cost

Hiring outsourced staff is another way to implement a cost reduction strategy. Many organizations outsource their digitization services as the cost is based on the project deliverables. Having a complete in-house strength will have higher cost impacts as the organization might have periods with a lesser number of projects. You will be required to pay the salary to employees even during this period when the team is overstaffed as you need to retain them for a busy period. It can help them remain competitive in their industry and ensure that they are making the most of their resources.

Until a permanent medical solution is available, the crisis will continue to place a great deal of stress on most companies. Still, it is prudent to look ahead at the advantages that will be needed in the future, and to design today’s cost-cutting measures accordingly. Your company may be an existing user of subscription software and there is a high chance that you are not making use of its full potential.

What is IT Cost Reduction?

By developing a mutually beneficial relationship with your suppliers, you can avoid paying extra. The suppliers are likely to bring their costs down if they see that your business is a profitable venture. There are several easy actions you can take to reduce business expenses. Virtualization is to replace physical hardware with virtual counterparts. Traditionally, every application had a dedicated server along with test servers.

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Thus, investments in IT have compounded each year, estimated to be somewhere around 7.5% of the gross revenue. While some may be still fighting hard to keep up with the IT expenses, others are already building up strong strategies for IT cost reduction. There’s a widespread assumption that as equipment ages, it begins to fail more often – the facts tell another story.

If you hire a freelancer for more than $600 a year, you will need to provide them with a 1099 form. Still, that’s easier than hiring a new employee and handling everything from tax withholding to paying for their work supplies. 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.

Finally, there are large costs incurred when programmers take shortcuts to hit deadlines as this often results in much more work later (look up ‘technical debt’ for more details on this concept). While many people use offshore as a strategy, I am going to go against the grain to say it is overused and that other techniques can often be more effective. Yes, I believe there is work that can be effectively performed offshore at cheaper rates. But, I believe too many organizations view offshore savings as a math exercise. For example, if offshore rates are 30% of home country rates, ROI’s are calculated as if every position moved to the offshore location saves seventy cents on the dollar. While this may be true of some work, there are many jobs which cannot be done as effectively offshore and I have seen several examples where the offshore cost was higher than the home country cost.

Strategy #3: Shifting staffing to outside contractors and consultants

Originally developed by Toyota in the 1980s to streamline its manufacturing process. By repeatedly asking “why,” the CIO can get to the root of why a business process exists and address changes that can bring it more in line with modern technology — and yield cost savings. First, DevOps usually reduces operational cost by engaging operations staffers early in the process. The exact amount of savings depends on the project but a cost reduction of 20% or more isn’t atypical — and over a five-year lifetime, the savings can add up. IT cost optimization is the art and science of reducing costs while enabling business operations. Cloud cost management and optimization tools allow businesses to reap the benefits of cloud computing without wasting money.

This can mean providing the same type of computer systems along with the same operating systems to all the employees in a company. It is also time-saving as uniform technology usage means less training required for the employees. IT cost reduction is the process involved in the detection and elimination of sources that hold less or no business value to the company while determining the IT budget.

Furthermore, these strategies save employees the frustration of going without the tools they need to do good work. They ensure everyone can focus on the jobs to be done, rather than trying to hunt down equipment that the company has lost or can’t afford. These practices are an investment in employee productivity and satisfaction. Furthermore, this intel can be shared across office locations to avoid duplicate work. Perhaps each location of your business orders hardware and software separately, for example.