IT cost reduction strategies

IT Cost Reduction: 10 Strategies to Reduce Your Expenses

For most organizations managing the budget is the highest point of concern. IT costs can prove to be a highly complex matter for many. Every year companies evaluate and revise their fiscal budgets to cut expenses and identify areas of potential savings. As digitization has become an important aspect to gain a competitive advantage in the market, companies are relying more on technology.

Thus, investments in IT have compounded each year, estimated to be somewhere around 7.5% of the gross revenue. While some may be still fighting hard to keep up with the IT expenses, others are already building up strong strategies for IT cost reduction.

IT cost reduction is the process involved in the detection and elimination of sources that hold less or no business value to the company while determining the IT budget. The process is alternatively known as IT cost optimization as it contributes to savings and reduces the size of the IT budget. It also helps in reinvesting into new IT infrastructure or new technology to boost business growth.

In this article, we will discuss the top 10 proven IT cost savings strategies that have helped to reduce expenses to a marginal extent.

 

10 strategies to reduce your IT costs:

 

1. Outsource resources

Outsourcing has been a very effective way to reduce spending on employees for some time now. For digitization services, many companies have adopted the strategy of outsourcing IT staff. This is a successful strategy as the project deliverables are the primary reason behind company costs. A full in-house strength means higher costs as sometimes the company might face a lower number of projects.

The company has to pay off employee wages even if that means a lesser number of projects or a net loss. Hiring outsourced or offshore staff with correct evaluation, tend to be an advantage for the company in terms of cost reduction. Also, services such as security or backup services can be outsourced to cut expenses.

 

2. Reduce employee-related costs

Personnel costs account for the costs behind each employee and are the primary expense of a company. With the growth of the company, the number of employees also increases. Often, a company ends up hiring a greater number of employees than required and also more experienced ones leading to higher expenses. The solution that many find is in laying off employees from time to time.

To avoid such situations, organizations can strategize the hiring of new employees such as hiring new talents and encouraging more internships. Hiring a lesser number of resources from offshore is also a value proposition.

 

3. Reduce turnover

The process of recruiting and training employees involves time, effort, and certain costs. The replacements of employees may even cost even higher, almost six to nine months of employee input. Thus, lowering the turnover becomes a necessity. Instead of mass recruitment, a company must concentrate on recruiting the right candidate for the required position. A robust and rigid recruitment process will ensure the selection of the right candidate.

The company must also ensure a good work environment for the employees where they can thrive as a professional. The company must offer a good work-life balance and space for growth to keep them motivated. This will help in retaining valuable talent and save up long-term expenses on repeated recruitment drives.

 

4. Leverage the power of virtualization

Virtualization or server optimization is an optimal solution to save costs on hardware and eventually cater to IT cost reduction. Virtualization means creating layers within a single server and replacing physical infrastructure with virtual counterparts. You can either compartmentalize low-usage servers and use them further or else, opt for a complete switch to virtual servers and abolish the requirement of physical servers.

Virtualization treats a single server as several servers that can support multiple applications at a single instance. This will not only reduce hardware costs but also save up on energy usage.

 

5. Implement cloud services

A very popular way of saving expenses for any organization small or large-scale is to make use of cloud services. Cloud services use remote servers, thus saving your hardware costs and eventually reducing business costs. As for cloud solutions, you only have to pay for the services that you use, it is one of the most effective cost-saving strategies for companies. Besides saving business costs, it also helps in boosting productivity and provides a secure platform for data or application storage.

If you want some extra security measures, hybrid cloud solutions can help you in attaining them. Hybrid servers distribute the workloads between public and private clouds, making it a better option for your business. Cloud services also give a competitive advantage, as most companies are now busy leveraging the power of this advanced technology.

 

6. Consistent IT infrastructure

Maintaining consistency or uniformity across all hardware and software applications for a company will save a huge amount of IT infrastructure costs. This can mean providing the same type of computer systems along with the same operating systems to all the employees in a company. It is also time-saving as uniform technology usage means less training required for the employees.

Having diverse systems will add up to training costs and will also consume the working hours of employees adding up to the overall IT costs.

 

7. Utilize open-source software

An effective way of decreasing software costs is to avail of open-source software over licensed ones. Licensed software is not only expensive but also requires additional costs from time to time due to software updates. This is a recurrent cost that can be handled through open-source software. Open source software comes free of cost, gives you access to the source code and you can seek help from the community to help your business.

Almost 3% of IT cost reduction is observed in this cost-cutting strategy. In addition to this, you receive software updates faster and will have access to several support options which reduces your dependency on one application.

 

8. Consider different aspects of IT costs

IT costs are comprised of two kinds of costs – operational and capital costs. Operational costs are the usual expenses required for the general functioning of a business, whereas capital cost is all about fixed assets. While operational cost is concerned with inventory, rent, equipment, and other costs around various business operations, the expenditure on the assets of the company accounts for capital costs.

The capital costs are typically fixed and much higher than operational costs, having a substantial impact on the overall IT budget. A careful evaluation of the requirements will lead to the selection of the right technology and equipment and thus will save on long-term IT costs.

 

9. Consolidating IT solutions

Consolidating IT processes means streamlining different IT processes into one unit. It requires effort to shift into a single unit but once done can produce the smooth running of businesses. Further, consolidating can save up work hours and space along with other IT cost reductions.

 

10. Choose less expensive hardware

Most capital costs of an IT budget are spent on hardware. You can compare your current hardware requirement and existing hardware in your company so that you can negotiate the options available to replace it. Choosing hardware that is less expensive can help in reducing a huge IT cost.

 

Conclusion

While IT cost reduction can get complicated for many the above-mentioned strategies can help you to strategize the IT cost budget. Following the above-mentioned strategies will not only help in cost savings but also help you to design a better IT budget each fiscal year and build a better business.

As a leading digital agency in Philly, Dignitas Digital helps its clients with expert solutions on how to reduce costs through our cloud services. Further, there are instances when we have optimized server performance so that the client can achieve optimal usage of resources, thus, reducing unnecessary costs behind server usage.

If IT-related costs are bogging your business down, consider applying these strategies or get in touch with our experts for a consultation call, or write to us at hello@dignitas.digital.