Where IT Cost Reduction Makes Sense (And Where It Doesn’t)

IT Cost Reduction Strategies
IT Cost Reduction Strategies

There are no two ways about it. Doing business in today’s economy is expensive. And businesses are always looking for areas where money can be saved. With IT being one of the most costly areas that a business needs to invest in, looking at how to reduce IT costs is an ongoing endeavor. But cost-cutting in the wrong places can have serious implications for any business, which is why you need to be careful about any IT cost reduction strategies that you implement.

We’re here to highlight how to reduce IT costs in a company and, more importantly, look at the areas where cutting costs can lead to problems later down the line.

What Is IT Cost Reduction?

While most businesses likely have an IT budget that they need to stick to on a monthly or annual basis, they also often look for ways in which this budget can be reduced, used most effectively, or reallocated to other projects which may be more reflective of their company goals.

IT costs can include anything and everything from the devices that your employees use, to the software installed on them, to your company phones, your PBX system, your servers, cloud services and more.  If you’re running or managing an internal IT department, your IT budget may include considerations like salaries and leave days. If you’re making use of Managed IT Services, or external IT support, the costs associated with those will also form part and parcel of your budget. And then there are the unexpected expenses that occur when technologies break down – when your laptop dies, your phone is stolen, your website is hacked, or your cloud services are infiltrated by an attacker.

As you can imagine, these numbers quickly add up. Which is why businesses are constantly looking for ways to reduce the costs associated with the running of their IT. And there certainly are ways that this can be done effectively – there are areas where IT expenditure can be reduced without putting your business at risk. But without careful analysis, it can be difficult to know where these areas lie, and which IT cost saving ideas will prove successful in the long run.

What Are The Benefits Of Cutting Down On IT Costs?

With IT budgets forming a large part of a business’ operational expenses, it’s easy to see that there can be benefits to IT cost reduction. Let’s take a look at just a few of the advantages that reducing you IT spend can have for your business:

1. Enhanced Efficiency

By focusing your IT budget planning on the areas that have the biggest impact for your business, and by prioritising adoption of existing technologies, rather than allocating IT spend to every possible new technology that your teams say they need, you can boost your teams’ productivity, help them to work more efficiently, and make better use of your and your teams’ time by focusing in on your business goals, rather than on software implementations, updates and more.

2. Increased in Revenue

With the right IT cost saving ideas, you will be able to spend less money on your technologies. The less money you spend, the bigger the margins that your business has to make a profit. Which, in today’s economy, can be critical to your business’ success.

3. Competitive Offerings

The more focused your teams are on developing your product rather than struggling with technology management, the better your service offering will become. And when your business is generating more profit, you have the opportunity to adjust your pricing to ensure that you remain competitive in your market, since there is the potential to adjust profit margins in favour of acquiring new business.

4. Increase In Market Share

When your business is running as efficiently as possible, you’re generating more profit than you have in the past, and you have developed a competitive product which can perform well in the market place, the next natural step will be seeing an increase in your market share – you will have the opportunity to attract more prospective clients, and be able to ensure that your existing clients stay with you for longer periods of time.

Things That You Need To Consider Before Implementing An IT Cost Reduction Strategy

While it is clear that there are benefits to reducing your IT spend, there are also risks which need to be taken into consideration. Which means that before you go into a cost-cutting frenzy, there are a few things that you need to remember:

1. IT Is At The Heart Of Your Business

You need technology in order to operate effectively in today’s modern world. And you need the right technologies that are going to help you reach your goals. When we talk about reducing IT costs, we don’t mean just going for the cheapest tech solutions, or investing in low cost technology infrastructure.

When done well, an IT cost reduction strategy will help you to identify the critical technologies that your business needs to operate, and allocating your IT budget to the right IT areas, rather than spending frivolously on every new technology that emerges.

2. Some IT Solutions Are Costly, But Necessary

We’d love to tell you that all the technologies that you need can be acquired for next to nothing. But the truth is, IT expenditure is a necessary part of operating a business, and there are times when it is necessary to spend more on an IT solution to avoid bigger expenses later down the line.

This is where having a future-proof technology plan is going to be a huge asset to your IT budget. It will help you to ensure that you are allocating IT spend in the right areas over time, all while ensuring a fixed monthly spend that your business can afford.

3. Not Every Business Needs To Cut Costs

There are plenty of businesses out there that are already allocating their IT budget efficiently, or that are not spending enough when it comes to their IT needs – at least, not on a consistent basis. For these businesses, you may go through the motions of putting IT cost reduction strategies in place, and find that in fact, the effort you’ve put in doesn’t result in less expenditure, or even results in a higher monthly spend to prevent a bigger outlay of money later down the line.

When you go through the process of looking at your IT expenses, you should be prepared to accept that you may already be spending your budget in the best possible way, or that if you are not spending it correctly, it’s because you are not spending it predictably. Cutting costs is not always going to be the right solution for your business.

10 Key Strategies To Reduce IT Costs

Bearing all of these considerations in mind, let’s jump into looking at how to reduce IT costs in 10 steps that you may want to put in place.

1. Build A Strong Company Culture

Your company culture is the heart and soul of your business. It defines who you are, what you do, and what separates you from every competitor in your market. When you have a strong company culture that your team members identify with and find value in, you’ll find yourself with happier humans who work more productively, and are less likely to leave your business at the drop of a hat.

You may be asking yourself, why are you looking at culture when you really want to know how to reduce IT costs? Well, hiring new employees is an expensive process, and the IT costs involved in onboarding them, training them, providing them with the software that they need to do their jobs, is high as well. And that’s not even mentioning the fact that new employees take longer to work productively, since new environments take some getting used to. Being able to maintain your teams and reduce employee turnover will have a positive impact on your bottom line. And building a strong company culture that your humans connect with is a huge contributing factor in reducing turnover.

2. Prioritise Training Over Experience

Having a team member leave your business is always a difficult situation. And it’s made even more complicated when that team member has been with your company for years on end, and has all of the experience that you need. Hiring someone with those same skills often means having to pay far more than you are used to, especially with the rise of IT salaries over the past few years.

This is why you should look into prioritising training over hiring people who already have the years of experience under their belt. It won’t always be possible – sometimes you need that experience right off the bat, and that salary that comes with it is simply the price that you have to pay. But if you are able to prioritise training as part of your company culture, you can ensure that your existing team members are constantly learning and gaining experience, making them more valuable assets to your company, leaving less gaping gaps if a high-level member of your IT team leaves, and providing you with the opportunity to hire candidates with less experience, because you know that they will ‘level up’, so to speak, over time.

3. Outsource The IT Services That You Don’t Specialise In

There is a misconception that every business needs to have their own internal IT department. In some cases, especially when it comes to large businesses, having a team of humans whose sole responsibility is handling IT support, servers, hardware maintenance and software upgrades makes perfect sense. But when you are a Small to Medium Enterprise (SME), then you want to ensure that every member of your teams is focused on your core business. And having an internal IT department whose jobs revolve around support, rather than around furthering your business, doesn’t necessarily make sense.

This is when outsourcing areas of your IT to a Managed IT Services company like Solid Systems becomes  one of the great cost cutting ideas for IT companies. You can have an entire team of IT professionals focusing on your technologies, while all of your internal efforts are directed at your own service offering. Businesses often think that outsourcing IT is more expensive. But in reality, when you take into account the salaries that you would need to pay a full team of professionals to look after your technologies and your IT support needs, outsourcing often ends up being the more cost effective solution, giving you far more value for the money that you spend, and allowing you to grow your business more effectively.

4. Embrace Cloud Services

Buying, setting up and maintaining on-premises infrastructure is an expensive undertaking. And I’m not just referring to the huge layouts for the hardware itself, but the time that goes into managing in-house infrastructure, and the salaries for the IT team that have the experience needed to maintain it correctly. And then, after all of that expense, it needs to be updated or upgraded, and your business has to foot the bill all over again.

This is part of why more and more businesses are looking at how to reduce IT infrastructure costs, and are moving to cloud and virtual services. It is significantly easier to manage and maintain, while also often coming in at a lower price point. The cloud provider is often the one responsible for maintaining the infrastructure itself, reducing the risk to your business and the costs associated with updating and upgrading machines and servers. But on top of that, it is far easier to assign resources when you need them, without them having to be provisioned all of the time. If you are finding the need for more memory, more storage, more processing power, but know that it will only be lasting for one or two months, you can upgrade your services for the duration that you need the higher capacity, and downgrade them again when you don’t. This has a huge impact on your IT budget, since you never need to pay for resources that you don’t need.

5. Know When To Go Public, And When To Go Private

When it comes to cloud migration, you will find yourself with two options: public cloud infrastructure, or private. And while there are benefits to investing in private cloud services all the way, the price point for private cloud is significantly higher, and not always necessary. There are plenty of occasions when public cloud facilities are the right choice, and taking a hybrid cloud approach by using a mix of public and private cloud services to meet your business’ unique needs is a great IT cost reduction strategy.

Let’s look, for example, at the storage of sensitive company data. Using public cloud storage for sensitive information comes with a certain amount of risk, since you aren’t necessarily in control of where and how the data is being stored. Add to this the fact that the resources for public cloud services are split between multiple companies, with each company providing their team members with access, and the potential for a security breach becomes higher than it would be on a private cloud server.

With private cloud, the increased cost comes with higher security, since you can control who has access to the server itself and the data being stored on it. You can also manage how and where your data is being stored, which can help you to stay compliant with regulations like GDPR and South Africa’s POPI Act, and is especially useful if you’re operating in multiple countries.

This being said, not all of your data is going to be sensitive information. Which means that being able to store some data on a private server, while using public cloud services for processing other business information, will help you to take advantage of the security features that private cloud solutions offer, while still cutting down on IT expenditure.

6. Improve Adoption Of Existing Software

Every team in your business is going to have its own unique software needs. Your Sales team needs to track prospects from your website, your email addresses and the phone calls you receive. Your Procurement team needs to track the orders that are being placed and ensure that they are delivered to the right parties. The IT team, if you’re managing one internally, needs to be able to prioritise support, hardware and software maintenance and putting technology to innovative uses to further your business. And Management needs tools to track progress on tasks, create and manage reports, analyse data and effectively run your departments. And this is all just scratching the surface.

It would be all too easy to allow each department to select the software that they feel they need to do their jobs, and pay whatever fees are associated with those apps and solutions. But the result will be high fees for multiple platforms, none of which integrate together, and each of which requires extensive training to get used to. Add to that the fact that each team member within those departments is going to have their own unique needs, and will want a different piece of software that they’re used to using, and you can see how it becomes a budgeting nightmare.

Rather than simply caving in and doling out the cash for multiple apps and software solutions, a great IT cost reduction measure is to focus instead on the adoption of existing technologies. Take, for example, Microsoft. Depending on the licenses that your business uses, your teams could have access to up to 36 different applications, but most companies have no idea how to even use the basics. Making sure that you are training your teams in how these apps work, what they can be used for, and how they can help your humans to work in smarter, rather than harder, ways will go a long way towards boosting adoption within your business. Which in turn will reduce the budget for meeting your software requirements.

7. Regularly Review Your Apps and Licenses

People joining and leaving your business is a natural part of operations. But, while businesses will naturally add licenses to their company profiles when employees join them, they often forget to remove licenses when an employee leaves.

Look at your Microsoft licenses, for example. It’s one matter if an employee leaves the company and is quickly replaced by someone new, but if an employee leaves the business and you have no intention of filling the role, forgetting to cancel the license subscription can mean being committed to paying for it for a full year. The more licenses you forget to cancel, the quicker this small one-user fee will end up adding up. And it’s not just Microsoft licenses that you need to worry about. Depending on which cloud services you make use of, you could be saving costs across the board by cancelling unnecessary subscriptions when an employee leaves the company, even if it is just a cancellation for the duration of the job’s vacancy.

8. Plan For The Future, Not Just The Present

One of the biggest mistakes that businesses make is only thinking of what they need right now. This is especially difficult when it comes to assigning an IT budget. It’s all well and good to look at your existing costs, and ensure that you have enough budget to cover them. But technologies aren’t static. They require constant maintenance, updates and upgrades, and if you don’t account for these, the result is unpredictable spend which isn’t accounted for in your budget.

On top of this, technologies are constantly evolving, and implementing new technologies that can boost your business, grow your bottom line, and help you to not just achieve, but exceed your goals is budget well spent. But these kinds of technologies need to be planned for. This is where a Managed IT Services partner can be a valuable asset to your company. They have experience in a wide range of technologies, and can help you to not just implement the right ones for your business, but plan for implementation over a longer period of time. This means that instead of facing unpredictable costs when a new technology is needed, or when a piece of infrastructure or hardware breaks down, you can plan ahead and budget accordingly for upgrades as well as new implementations.

9. Analyse Your Budget On A Regular Basis

Costs often fluctuate, and this is never more true than with technology. If you’re based in South Africa, the cost of things like Microsoft licenses, which are billed in dollars, are going to adjust with the exchange rate. And no matter where you’re based, when there are global supply shortages, as we’ve seen with chipsets over the past three years, the price of technologies that require those resources will become inflated.

And then there are your business technology needs, which are rarely static. There will be months where your teams are running around like headless chickens trying to get everything done, and there will be months when they sit at the phone begging for it to ring so that they have something to do. Once again, this is the nature of doing business – there are on-seasons and off-seasons no matter which industry you might find yourself in. And being able to adjust your technology resources to suit the busy periods, and reduce them again during quiet months, is critical. Which is why looking at your budget on an annual, or even a bi-annual basis is a must if you want to save money in the right areas.

If you set an IT budget 5 or 10 years ago, the scenario and the costs that you are faced with today are going to fall well outside that budget. And if you are only looking at your needs once a year, either during a busy period or during a quiet one, the chances are that you are either going to over- or under-budget.

10. Use The Right Hardware For Your Needs

Some people will tell you to opt for cheap hardware. In fact, when I was looking up what other MSPs say about cost-cutting, that’s exactly what the recommendation was. But, in my mind, that’s setting yourself up for disaster.

Sure, there are some cases where a cheaper piece of hardware will suit your needs just fine. But how long will it last? How often will it need to be replaced? And is the hassle of having to work with hardware that does what it says on the box, no more, often less, worth the once-off saving that you get by buying it at a lower price?

My recommendation is to make sure that you are using the right hardware for your needs. Don’t overspend on the highest end gaming laptop when you’re just going to be using it for work. That is simply unnecessary. But do invest in a reputable brand with excellent warranties and outstanding support, that will last you a decade without any trouble.

If your teams are working remotely, and you know that they’re going to need webcams and headsets for meetings, you could invest in cheap ones that kind of work, but provide blurry picture and crackle whenever your team members talk. It’s a legitimate option! But every time you jump on a call with someone using them, you’ll find it hard to understand what they’re saying and impossible to gauge their reactions, which makes it significantly more difficult to connect to the person at the other end of the call. Or, you can spend a bit extra for good quality cameras and microphones which will make every call a pleasure. The choice is yours, but I certainly know that at SOLID, we make sure all of our team members have good quality headsets, because I cannot stand the background noise, crackling and straining my ears to understand what someone is saying.

One IT Cost Reduction Strategy You Should Never Consider

We’ve looked at 10 different ways that you can reduce your IT expenditure, but you’ll notice that there is one area that I haven’t mentioned. And that’s because it’s one area where cost-cutting measures should never be considered.

When it comes to your security, you never want to cut corners

Security apps and solutions can be expensive. There is no denying it. And you may be tempted to remove them from your tech stack because, after all, who is going to attack your company anyway? You’re a small business – attackers wouldn’t even know who you are!

But when it comes down to it, paying a monthly fee for security services is far less costly than experiencing a cyberattack or a data breach. If your business falls victim to an attack and you are underprepared, or don’t have the security components in place to put a stop to it early on, the costs involved can include:

  • Paying ransom demands to retrieve your data,
  • Operational losses when your business grinds to a halt as you try to deal with the attack,
  • Loss of business when your clients lose trust in your company, and
  • Regulatory fines if personal data becomes compromised.

Now, doesn’t it make more sense to pay for the right security solutions on a yearly or monthly basis?

How Solid Systems Can Help

When it comes to IT budget planning, having a Managed IT Services Provider that you trust by your side can be one of your biggest assets.

When any company, big or small, starts working with Solid Systems, one of the first things that we do is review your existing technologies, looking at areas where you can be making better use of existing solutions, and where improvements are needed. We then create a strategic, future-proof technology plan that will see you spending your IT budget in the right areas, implement IT cost saving ideas where they will have the biggest impact, and ensuring that your systems, your services and your tech is all helping your business to grow, without breaking the bank.

If you are ready to start analysing your IT budget, to start putting plans in place that will see your technology working for your business for years to come, or just want to talk to our IT consultants or cloud consultants about the best possible solutions for your business, don’t hesitate to get in touch with us today, or book a consult right now.

Frequently Asked Questions (FAQs)

How can an IT department reduce costs?

There are plenty of ways that internal IT departments can reduce costs. These can include outsourcing the IT services that don’t directly relate to your company’s speciality, embracing cloud services, taking a hybrid approach by splitting processes between public and private cloud servers, improving adoption of existing software, regularly reviewing your apps and licenses, and using the right hardware for your needs.

What are the ways to reduce IT costs?

IT cost reduction strategies can help you to reduce IT expenditure. These strategies include:

  • Building a strong company culture
  • Prioritising training over experience
  • Outsourcing the IT services that you don’t specialise in
  • Embracing cloud services
  • Knowing when to go public and when to use private cloud services
  • Improving adoption of existing software
  • Regularly reviewing your apps and licenses
  • Planning for the future, not just the present
  • Analysing your budget on a regular basis

Using the right hardware for your needs

What are the examples of cost reduction?

One example of an area where IT costs can be cut is by taking a hybrid approach to data storage. Using public cloud storage for sensitive information comes with a certain amount of risk, since you aren’t necessarily in control of where and how the data is being stored, or who has access to the server as a whole. Private cloud services come with higher security and increased control over server and data management, making it better for storing sensitive data. But not all of your data is going to be sensitive information. Which means that being able to store some data on a private server, while using public cloud services for processing other business information, will help you to take advantage of the security features that private cloud solutions offer, while still cutting down on IT expenditure.

What are the steps in cost reduction?

Looking at where IT costs can be cut is not a once-off process, and it’s not a quick one either. But it is necessary. Taking the time to review your IT expenditure, and putting together an IT budget that will help your company to enhance efficiency, increase revenue, make your offerings more competitive and increase your market share, is a step-by-step undertaking. The process should include reviewing your apps and licenses, planning for the future, working on your company culture, and more. And most importantly, it should be prioritised on a regular (annual or bi-annual) basis, rather than being done only once in a while.

What are the challenges of IT cost reduction?

While every business wants to spend as little as possible to generate as much profit as they can, cutting costs in the wrong areas can be disastrous. And this is especially the case when it comes to IT, where unexpected expenses are likely to be extremely high cost. It is far better to plan ahead and have a budget which includes predictable expenses in order to upgrade and maintain your infrastructure and hardware, instead of expecting that everything is going to run just fine, and suddenly finding yourself having to urgently replace an on-premises server that has gone down, and brought your operations down with it. The same can be said for securing your users and data against cyberattacks.

Daniel Avinir

Daniel Avinir

Head of Client Success at Solid Systems | Virtual CIO I have a love and passion for people, their minds, technology, and nature.I believe in empowering people to work in increasingly flexible and productive ways, helping them unlock the collaboration potential and leading the cultural & technological change of our time.

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