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10 ways to reduce your IT costs

Updated: Apr 15

As more and more aspects of business are impacted by digital transformation (and with the rise of AI it may well impact some less than expected aspects of your business) and new technologies, new techniques and new skills arrive almost every month, the importance of the IT department within a business has never been higher.

From 'data processors' housed in the bowels of the company, the It department is now central to operations and is recognised as such with a place on the board. The smartest companies view their IT operations as key strategic assets that help their people work better and allow for better decision-making.

But with the growth of the It department, so comes higher costs: more people, more infrastructure, more cloud and software costs. And even though IT is a core business function, its growth can threaten business budgets. Here are 10 ways to reduce your IT costs, allowing you to manage your IT spend proactively.

1. Audit your tech stack


The first thing to do to manage your costs is to understand them better. making an audit of all your costs will help you to identify where inefficiencies lie, and cost savings can be made. It's quite common to find that IT expenditure has grown in an ad-hoc manner, due to once urgent needs, one-off projects, initiatives that were cancelled and reliance on legacy systems that could be updated or eliminated. Examples include paying for two services or applications that perform the same task, or using multiple tools when you could be using just one.


Take stock and prioritise your spending. You’ll probably be surprised.


2. Manage IT contractors


IT contractors are an important part of any IT department's resources as they can be brought in to cover peaks and troughs or they bring skills and experience that are not available internally or are required only temporarily.


However just as you may be spending money on unnecessary technology, you need to evaluate whether you’re spending on outside contractors who have outlived their usefulness.


Alternatively, maybe IT contractors and their skills are exactly what you need for project work, rather than hiring head count. In those cases, contractors may be the less expensive alternative.


3. Renegotiate with vendors


It's worth checking your vendor contracts because you may be paying for more than you need. It's easy to renew a rolling contract without reviewing your requirements. For example, you may be paying for 100 seats, but you only need 50, or you might be contracting for twice the data storage than you actually need. Contact the vendor and discuss an adjustment more in-line with your current requirements. From the vendor’s standpoint, it’s better to trim revenue for a while than lose your business entirely. And if your needs change, contact vendors again to adjust what you're paying for again.


4. Reduce staff turnover


As in any department of an organisation, it’s more expensive to recruit new employees than to retain them. Think about what you can do to keep staff from leaving in the first place. A certain amount of staff churn is healthy and inevitable but spend some time and effort delving into job satisfaction issues: flexible work arrangements, training opportunities, time to pursue passion projects and pay rises. People stay where they feel valued, so concentrate on finding ways to accommodate your people.


5. Move to the cloud


For most applications, the cloud-vs.-infrastructure debate is over, and cloud computing has won.


It may be that your business’s particular needs require maintenance of its own hardware, maybe for legal or regulatory purposes, so those applications must stay in-house. But otherwise, especially if you haven’t considered it lately, look again at moving your data centres to the cloud.


This may not save budgets in the short-term; it takes time and care to undertake a cloud migration, and you may have some amortisation or contractual issues to work through regarding your servers. But over the mid- and long term, the flexibility and scalability of the cloud will make more economic sense than staying locked into your own hardware systems.

Moving from your own servers to cloud-based, on-demand services lets you move capital expense (CapEx) to operational expense (OpEx); depending on your balance sheet, that may make sense for your business.


6. Virtualise servers and databases


Not all applications and databases require their own servers. In fact, with virtualisation and container technologies, very few do. Using containers, a single server can run multiple applications under a single operating system but be protected from each other; they share the same processor, storage and memory, working fully independently of each other.


Because all those containers sit on the same hardware, the cost savings can be considerable.


By virtualising databases, it’s possible to query several databases at once without having to duplicate the data on multiple servers or manually combine databases. Virtualizing your databases speeds and simplifies queries, reduces bandwidth and storage demands and makes data management easier for end users.


7. Decommission out-of-date licenses


Undertaking a software audit is essential if you don't have that information to hand already. An audit often reveals areas of spend that are no longer necessary and have simply been forgotten. It may be that you needed a license for a long-since decommissioned project or have licences for staff and contractors who either no longer use the software or who have left the company. If you don’t need a licence or it’s out of date, decommission it.


8. Don't worry about sunk costs


It’s often the case that a project that is not working is kept going because of the IT spend already accredited to it. The thinking being that you've spent x amount already and rather than write-off that cost, surely it's better to carry on spending until the project comes good?


True, spent money is gone and nothing you do will get it back. But spending budget on mistakes from an old budget only compounds the old mistake. Rather than continuing to invest in solutions that don’t work the way you need, focus your spending on things that will benefit the business going forward.


9. Assess variable costs


Variable costs such as the amount of cloud data storage you’re using, the number of software license seats you’re paying for and the consultants you work with are all likely to change month to month, depending on your immediate needs.


When budgets get squeezed — or if you’re trying to get ahead of the budgetary curve — your variable costs should be an early place to make savings.


10. Automate where possible


Most of the time, work in the IT department is the unglamorous, routine tasks that although are tedious, make the company go round. Tasks such as employee onboarding, software updates, end-user hardware imaging and replacement, creating (and deleting) cloud accounts and managing email are all routine but utterly necessary as the business would stop functioning without them.


Several of these more mundane tasks can be automated to a greater or lesser extent, so exploring automation and making the time to implement it frees up staff to do more strategic and profitable work. It could also possibly impact staff retention positively as well.


Manage your budgets strategically


Even in companies that regard IT as a strategic asset and not a cost centre, when times are tough, there’s likely to be a business mandate to reduce costs. But even in good times, you should always be looking to make efficiencies that will allow the flexibility to trim expenses on things that don’t matter so you can direct resources on those that do.


The key to staying strategic is being able to demonstrate that the IT function is worth far more than it costs. The more efficiently you can manage the costs, the easier that will be — and the more value you can bring to the table.


NetSuite helps you manage your IT budget more efficiently


NetSuite Planning and Budgeting is a cloud-based software solution that lets finance teams quickly and easily produce budgets, financial projections, and what-if scenarios, as well as generate reports. Instead of spending time on manual processes, teams can replace time spent on low-value activities, such as data entry, with high-value strategic analysis.


In addition, data synchronisation gives all teams access to the same real-time data, allowing better control of information and creating a single source of truth. Stakeholders are connected in a single environment, improving participation and accountability. And any changes automatically flow through to reports and dashboards. NetSuite Planning and Budgeting also provides collaborative budgeting capabilities so that teams can work together on budgeting and planning activities.


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