The economic recession that we’ve been currently observing gives a hard time to all IT decision-makers. As they typically focus on delivering products, providing innovative ideas, and driving business results, now their priority is either avoiding layoffs and saving the team, IT cost-cutting, or even surviving.
Switching to the crisis mode from regular operations requires major changes in the IT management strategy. For IT departments, it involves mainly reducing overhead, but also cutting costs of ongoing operations, finding solutions for increasing IT efficiency, and eliminating sources of low business value and waste.
Here are 6 tips from our experts that will help you successfully implement and execute this approach.
One of the most frequently used IT cost reduction strategies is outsourcing. The market is growing rapidly: according to Deloitte, IT outsourcing spending will reach $519 billion in 2023, which means a 22% increase over 2019's numbers.
Using outsourcing provides IT departments with a number of opportunities for cost reduction, including:
If you want to explore the topic of outsourcing-related cost savings, proceed to “IT Outsourcing Costs Breakdown & Cost Savings Analysis”.
Implementing IT service management (ITSM) is the next solution that contributes. It provides companies with a number of business and technical benefits, such as:
Automation is one of the most promising IT cost reduction strategies that gain in popularity. According to McKinsey, at least one function is automated in 31% of organizations. The next 57% are planning to use automation to boost employee productivity and performance. Also, the number of automated jobs increases by 14% annually. And there’s definitely a reason behind it - it was proven that automation can boost global productivity growth by 0.8-1.4% every year.
On the micro-scale, these dependencies can be translated into a number of benefits for the product company, such as:
Automation can be applied to a number of operations, including job scheduling, recruitment, invoicing, software maintenance, coding, testing, and more.
Software license audit is the way to recognize inefficiencies and plan optimizations. It can help to reduce IT costs by:
Open-source software is one of the most efficient ways for IT cost-cutting. It can contribute to reducing IT costs by:
Virtualization is a process of replacing physical hardware with virtual tools and elements. It helps to reduce IT costs by providing:
Cloud adoption is one of the most frequently used IT cost-reduction strategies. Already in 2019, 94% of organizations used cloud computing. The solution provides companies with multiple benefits such as:
Consolidating infrastructure can strongly contribute to IT cost reduction. Even basic changes, such as unifying the same operating system across various departments of the company, can significantly lower the costs related to integrations, plug-ins, tools, and required training.
Infrastructure consolidation and retiring systems come with a number of benefits, such as:
In 2023, when the risk of security breaches and data leakages is higher than ever, cybersecurity became a top priority for a number of businesses. Obviously, it’s better to prevent than to cure, and risk-based security investments can help to reduce IT costs by:
As the majority of breaches are the results of human errors, education is critical to maintaining cybersecurity. Increasing employee awareness by providing training about cyber threats, as well as implementing cost-effective cybersecurity measures (firewall protection, antivirus software, intrusion detection systems, and more) can help you to reduce your IT costs by:
Establishing the right key performance indicators (KPI) can reduce IT costs by:
Last but not least, regular monitoring and adjustments of IT budgets can significantly contribute to IT cost-cutting by:
Reducing IT costs can bring several risks, particularly in areas such as data security and privacy, operational changes and automation, and software license optimization. Let’s take a closer look at those areas.
Risk: Cost reduction efforts may compromise data security and privacy, leading to unauthorized access, data breaches, or non-compliance with regulations.
a. Implement robust data security measures, including encryption, access controls, and regular security audits.
b. Conduct thorough risk assessments to identify potential vulnerabilities and prioritize mitigation actions.
c. Ensure compliance with applicable data protection regulations (e.g., GDPR, HIPAA) and industry best practices.
d. Educate employees about data privacy and security protocols, including the proper handling of sensitive data.
e. Regularly monitor and update security protocols to address emerging threats.
Risk: Implementing process changes and automation can introduce operational risks, such as system disruptions, errors, or inadequate training.
a. Develop a comprehensive change management process that includes risk assessments, testing, and stakeholder communication.
b. Conduct pilot tests or proof-of-concept projects before implementing changes at scale.
c. Provide adequate training and support to employees to ensure they understand and adapt to new processes or automated systems.
d. Establish effective monitoring and error detection mechanisms to identify and address operational issues promptly.
e. Maintain open lines of communication with stakeholders to gather feedback and address concerns during the transition.
Risk: Inadequate management of software licenses may result in compliance violations, legal issues, or unexpected costs.
a. Conduct a thorough software asset management (SAM) process to inventory and track software licenses across the organization.
b. Establish a centralized license management system to ensure accurate record-keeping and timely license renewals.
c. Regularly review software usage and license entitlements to identify underutilized licenses or opportunities for optimization.
d. Stay updated on licensing agreements and terms to avoid unintentional violations.
e. Implement software license compliance training for employees to promote awareness and adherence to licensing policies.
In all these areas, it is crucial to maintain a proactive and holistic approach to risk management. Regular monitoring, continuous improvement, and engagement with relevant stakeholders will help mitigate risks effectively while achieving IT cost reduction goals.
So, how to reduce IT costs? Efficient IT cost reduction strategies typically combine a variety of measures and tools. Although implementing the tips listed above is truly promising, it might be challenging to introduce them all at once.
However, there is a recipe for efficient IT budget optimization in multiple areas: outsourcing. An experienced outsourcing partner will be able to combine the tips listed above and provide you with a mix of cost-saving approaches. They will not only provide you with requested services and operations but also help to structure your processes, implement efficient tools and technologies, and improve your overall key metrics. This leads to both cost reduction and improving the quality of your services, which translates to higher customer satisfaction.
If you’d like to learn more about IT outsourcing opportunities, feel free to contact us. As an experienced IT outsourcing company, we will be able to advise you on top IT cost reduction strategies that will correspond with the specific needs of your organization.
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