5 secrets of IT cost rationalization
Many heads of companies share a common opinion that IT is expensive and will always remain so, because using state-of-the-art solutions is costly. Is that true?
The belief that state-of-the-art solutions must be expensive is not entirely justified. It automatically discards the economic benefits resulting from standardizing the solutions or developing the skills of employees (the so-called learning curve). In practice, IT costs are governed by the same rules as the other costs in the company, and can be shaped according to the market situation.
Currently every board member in a large organization faces the challenge of constant control of IT spending. Due to the increasing scale of support for business processes offered by technology tools, as well as the development of electronic channels of communication, budgets for the purchase of IT systems and services often remain unchanged or are only slightly downsized, even in during slowdown periods. Because of these trends, many companies have adopted a tactics of regular, almost annual IT spending reduction by a few percent. Even though effective IT budget rationalization requires more effort than in the case of other departments, it is still possible.
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Below are five recommendations to help you rationalize your costs effectively.
1. Make an inventory of systems and functionalities
Effective cost management must be based on reliable knowledge. Therefore you should start searching for savings by preparing a thorough inventory of IT solutions and the services they provide. Making such a list will help you to identify the real needs of the company and the capabilities of its IT infrastructure.
2. Identify the areas of potential changes
In the course of its development, every company increases the number of systems, devices and telecommunications services used by the employees. A big part of these are unquestionably necessary, while some are either redundant, or accessed by too many users. Giving up on some of such devices or services can bring fast savings. It may also help to cut a few “hidden costs”, such as license fees for unused systems or redundant servers that host unnecessary applications.
Licensing policies of IT vendors can also offer room for savings. Changing the licensing model for core applications (e.g. replacing licenses for all users with named user or concurrent user licenses) can reduce the total cost of system operation even by tens of percent!
3. Optimize functioning within the new structure
Discarding or integrating even just a few devices or systems can significantly impact the costs of ICT infrastructure administration and maintenance. Savings obtained in this way may be used for improvements in other areas related to the maintenance and development of IT.
4. Review your service model
Any cost-cutting endeavor is a good opportunity to analyze the ways IT services are provided. Both the head of IT department and the directors of other key departments should ask themselves a few questions. What level of core system availability is considered to meet the organization's needs? Which areas of activity should be supported by in-house IT specialists and where can we use outsourced services? Are we ready to outsource our IT (or extend contract with our service provider)? Which system can be administered by an external company? Do all support services need to be provided on the basis of pre-defined SLAs?
Not all solutions must be available 99.99% of time per year. Even slight changes of the above-mentioned indicators may bring significant savings connected, for example, with reducing the number of vendor's staff required for the maintenance of IT solutions in the company. Any such decisions should be preceded by an in-depth analysis of risk related to reducing the level of availability or changing the support model and hiring an outsourcing company.
5. Do not be afraid of experiments
IT is a field where new technologies and solutions appear almost every year. Many of them carry a significant potential for optimization. That is why experimenting is worthwhile. A small pilot project will help you to evaluate the real results of deploying new technologies without bearing the costs of company-wide implementation. Identifying such new solutions, or more broadly: ways of optimization should be performed by the company's employees. It is them who know the business processes, organizational culture and the potential of staff members best.
After a decade of constantly increasing their investments in IT, for at least a few years now companies have been focusing on reducing IT solution implementation and maintenance costs. Thanks to the high level of innovation presented by vendors and users of corporate technology, the increasing pressure on cost reduction is not equivalent to compromising IT solution quality. However, combining the two opposite trends requires considerable discipline and innovation both from the vendors and the IT solution users in companies.