If you’re facing cost optimisation of your IT, you’re not alone. The recent crisis has affected the budget of almost all businesses in one way or another. Some will have benefited from the demand for their products or services, but most have to face unwelcome cuts.
The move to online collaboration, initially considered a temporary measure, is now becoming a part of the permanent strategic direction as fewer and fewer people want to come back to the office. However, the increased need for online communication and collaboration tools and infrastructure rarely comes with a budget increase to IT departments. This is where cost optimisation, as opposed to cost cutting, comes in.
Optimise costs, rather than cut
According to Gartner, cost optimisation is a ‘business-focused, continuous discipline to drive spending and cost reduction, while maximizing business value’. So, it’s not about ‘minimal cost – full stop’, but about spending the money wisely, in a way where your every Pound, Euro or Dollar brings the maximum benefits to the business.
To allow your organisation to withstand the pandemic-related crisis and get ahead of your competitors, you’ll need to reallocate resources in a way which not only cuts costs, but also meets or exceeds the revenue goals of your business.
Cost optimising in IT – where to start
In this section, we’ve listed some of the techniques you can implement when you need to review your expenditure.
Start off by diagnosing and assessing the current budget situation. Look at the spending of your budget from an in-depth perspective, remembering to follow up on each cost which is not entirely familiar. Then, identify critical areas which you must keep, and those that are less important and could be scrapped or reduced. So which areas should you consider?
What to review when optimising costs?
When looking for some ways to reallocate your spending, review the following areas:
- Product portfolio
Review the wallet of all the products that you support or maintain – perhaps some of the apps are redundant, but no one had the courage to say that out loud before? Removing unused software products could mean money saved on upkeep, storage, server charges and licenses. Additionally, if any of your systems are a pain to use, removing or replacing them with a simpler app will unburden your staff freeing up their time.
Consider decommissioning legacy programs – it’s very likely your organisation is struggling with maintenance due to a declining talent pool of developers fluent in the given technology or framework. And that’s not the only costly thing about maintaining legacy. If the system is old, but still very important, use the money to migrate it to a new technology.
Also think if a number of smaller apps with unused functionalities could be replaced by one solution, but one which is really well-suited to your needs (e.g. a custom-made platform)? Or perhaps you could use an existing program, but invest money to add the functionalities you need?
Finally, consider an audit of your software to discover what part of it might be a security risk to your organisation, and what slows your internal processes down. An audit like this could save you money by saving you from a potential data leak and by pointing out things which have a negative impact on your organisation’s efficiency.
- Processes
Look for processes which could be simplified and standardised. Automate and digitalise operations, go paperless (yes, there are organisations which still use pen and paper!)
Consider using new technologies – for example are there any processes which could be automated?
Finally, look at the data which underpins your processes and business decisions. Consider optimising your data through business intelligence – enhanced data flows mean a greater operational agility, with systems working more efficiently and being able to handle more processes.
- People
Reviewing and decommissioning various applications will not only reduce maintenance and hardware spend but will also give your team more time to support new initiatives. With the increased importance of digital, staff may need to develop in innovative areas to work on new projects – spending money on training is investing in people.
Our belief at Future Processing is that if you treat people fairly, they will be more committed and more engaged in their projects going beyond their way and delivering better value to our customers. This also keeps the attrition rate small reducing the costs of hiring and training new staff. So, rather than dismiss, invest in people.
- Physical Resources
With the rise of remote working, re-evaluate the logic behind running all the offices that you own or rent. Would hot desking or hiring out some of your space be a good option? Could perhaps renting a temporary conference room for a couple of days a week work for you? How about asking people to come to the office less often? Many of them will appreciate the offer and for you, this means a smaller pressure on the IT infrastructure (desktop computers, routers, printers, energy, bandwidth, etc.)
Looking beyond office space – what about data centres? Would moving to a cloud not be a better solution? There is a variety of cloud pricing models to choose so you can ensure you get the best value for money.
- Services
Review the services and subscriptions to see if there are any unused ones that your business is paying for.
Also, look into contracts with suppliers – are you sure you need all that you pay for in the contract? Does it perhaps contain services that you haven’t used for years, or, let’s face it – never used?
It’s also worth considering different sourcing options. Would multisourcing be a good option for you? Or, on the other hand, perhaps it would be better to replace several suppliers for an end-to-end tech partner who can sort out anything from business analysis, through software design and development, all the way to its maintenance?
Cost optimisation – execution
When assessing the optimal use of services, software, people, resources and processes, never lose your focus on value.
- Cost management framework
Gartner recommends adopting a consistent cost management framework to give the entire organisation a common understanding of which costs should be cut and optimised and which should be protected to drive the organisation forward.
- Collaboration across business units
Be inquisitive and collaborate with people across the organisation – ask business unit representatives why they need a certain asset and see if you can deal with it together in a more budget-friendly and optimal way. Gartner stresses the importance of collaboration between heads of business units as the key to eliminating redundant activities and finding funds for growth driving.
- Yield on costs
Gartner further says it’s helpful to use a unit of productivity or a yield on costs – with this method, costs may rise in absolute terms, but are ‘more than offset’ by a faster growth in the returns on those costs. Remember, it’s not about not spending the money, but about putting it in the right place to optimise your IT and business results.
Improving things – a part of the company culture
To make the money-saving effect last, cost optimisation should not be a one-off task, but rather, a part of your organisation’s way of life, or, in other words, company culture. Therefore, listen to the people at all levels, give them means and encourage them to share their thoughts of ‘this is not working’, ‘someone should fix that’, ‘this could be done in a more efficient way’. Letting your employees speak will help making things better, more efficient, and more budget-friendly in the long term.
Invest in atmosphere
Also, when it comes to employees, with so many people working remotely, it is now more important than ever to invest in maintaining your company culture. Think a get-together in a pub, a picnic, or a BBQ, if you can meet physically. If remote is the only option, there are plenty of virtual team building activities. The stronger culture you’ll build, the more committed to your unit and your organisation’s goals the people will be. And this can only be of profit.
Be agile and ready to change
In times of uncertainty being flexible and agile will be your saver. The pandemic has shown us that nothing is set in stone, and, like never before, it’s now worth being open to and, importantly, ready for change and re-evaluation of tactics.
Sources:
The CIO’s cost-optimization playbook: 7 tips for tight times | CIO
12 IT budget tricks to reduce costs post-COVID | CIO
driving-business-performance-with-strategic-cost-optimization-e-book.pdf (gcom.cloud)