Three step approach to reducing IT costs
It’s not just households who are feeling the pinch at the moment; most businesses are feeling the strain too, with rising costs hitting everything from supply chains and energy to technology and talent. A tense geopolitical situation is adding to cost uncertainty, with predictions from many quarters that the cost of doing business will continue to rise for some time yet.
The forces driving rising costs
All this comes on the back of two tumultuous years of a global pandemic, which prompted historic and wholesale shifts in working practices and had businesses scrambling towards digital transformation.
It’s fair to say that, in the post-Covid environment, all businesses have become technology businesses and need to meet new demands that include digitalisation and virtualisation alongside ever evolving customer and employee demands. No business can escape the need to spend on IT.
Many CIOs now find themselves in the unenviable position of having to simultaneously tighten their belts and invest in more technology that’s better, faster, and more secure.
All businesses are technology businesses
For many businesses, technology and IT costs are rising much faster than in any other department. And not just because the costs of hardware and software are increasing (although they are), but because IT and technology have become embedded across the whole business. It now underpins every process and supports every role.
Hybrid and remote working models have necessitated huge spending on internet connectivity and cloud-based collaboration tools, and many businesses have deployed new technologies to streamline business processes, drive efficiencies and free up resources in other areas.
IT costs are rising not simply because IT costs more, but because technology increasingly is the business.
Cross-functional transparency is key
For businesses looking to manage costs prudently, there needs to be a cross-functional transparency that allows IT supply-and-demand spending to be seen in the wider context. Across sectors, it’s estimated that half of all IT spending comes from other back-end functions or business processes, and it’s important that all stakeholders are presented with the facts, figures and visualisations that demonstrate this.
CIOs are increasingly being seen as strategic partners, and their input will be crucial when it comes to managing costs for IT that runs the business, as well as costs for new technologies that can help grow and improve it. Traditional benchmarks such as IT spending as a percentage of expense or revenue are increasingly outdated and misleading. Instead, there is a need for costs to be examined in a much wider the context of the business value it delivers and the efficiencies it drives.
What can businesses do?
Assuming there’s cross-functional agreement that IT spending is essential and that reducing IT costs is a business-wide responsibility, it’s a good idea to take a three-pronged approach to managing costs. These are to reduce, to replace and to rethink.
In terms of technology spending, reductions can be made both by the wider business and by dedicated IT and procurement teams. For example, streamlining the consumption of and demand for IT services or pausing IT-hungry projects that are not essential to the short-term business strategy. IT and procurement teams can help reduce spend by seeking out new vendors and suppliers – or renegotiating contracts with existing ones – and by increasing utilisation rates to ensure the best value of any IT spending.
In many cases, businesses will save money by replacing costly legacy infrastructure with new, future-ready alternatives. In fact, as more and more businesses become entrenched in the quickly expanding digital economy, we can expect as-a-Service solutions to proliferate. While initial costs may be slightly higher, the pay-per-usage nature allows for spending to be more closely aligned with actual demand, helping to reduce costs in the longer term. On-premises software, data storage and infrastructure can all be replaced with cloud-based solutions that deliver further savings on maintenance and talent.
Undoubtedly the most effective and sustainable way of managing costs is by rethinking the business IT environment and accelerating digital transformation. Investing in next-generation architecture and connectivity, alongside embracing automation, and migrating workloads to as-a-Service, pay-as-you-use platforms, is the best solution for businesses looking to make significant and lasting cost reductions. This sort of fundamental shift in the IT environment not only shrinks the technology cost base across the business, but it will also ensure businesses are in the best possible position to innovate and grow.
So, what’s next?
No business can afford to stand still in the digital economy, and IT leaders need to work alongside other business functions to develop strategic plans for moving forward. Outsourcing to specialist third-party providers is an important first step towards reducing infrastructure, facilities, management, and staffing costs while ensuring IT is delivering business-wide value.
Working with a cloud provider for things like data management, cloud optimisation, backup and disaster recovery not only means even the smallest business can maintain the pace of digitisation, but it also gives them access to the best talent while reducing IT costs for the business.
Gain visibility and optimise your environment using our expertise.
M247 have a suite of cloud services designed to assist with just this challenge. Our cloud optimisation solution provides you with a financial management toolset, CloudCheckr so you can view your entire cost base and select recommendations for optimisation. M247 also offer a cloud health check as part of our managed service where one of our certified cloud architects will work with you to understand your cloud environment and implement optimisations.