One of the issues currently on the mind of every IT business owner is finding efficient IT cost saving ideas. The longer the situation with the COVID-19 pandemic lasts, the higher the likelihood that even the strongest business organizations will have to make unpopular financial decisions. Many IT companies have revised their plans and put projects on hold to save resources. Some enterprises are rebuilding their product to fit the needs of the new reality. However, both will have to think about IT cost optimization. The Gravum team has prepared a short guide to optimizing IT costs in these uncertain times.
Optimization Is Not Just Cost Reduction
Many understand optimization simply as the cutting of costs. But this is not the only goal. Optimization is not so much about identifying excess spending, but also about ensuring that the current tasks are carried out in the most efficient way.
Often, the reduction in IT costs is associated with human resources and implies laying off staff or decreasing wages, transitioning to cheap health insurance, and so on.
Such methods can lead to a short-term immediate increase in profits, but in the future, the organization will have to spend more to recover the lost positions. In contrast to cost reduction, cost optimization is a long-term process that should take place with minimal impact on work processes.
IT Cost Optimization: Phased Strategy
The situation with COVID-19 made most organizations realize that the traditional approach has lost its relevance and that they can no longer rely on the old business development model.
A natural reaction to the economic downturn is a reduction in costs in all areas. But the goal is to find the right balance between a fair economy and tactical costs, which is necessary for business development.
Stage 1: Minimization.
Reduce and prioritize costs. At the initial stage, companies pay attention to short-term actions to optimize costs. While actions aimed at saving resources are important, pursuing extremely short-term goals can lead to unforeseen problems.
Stage 2: Optimization.
Eliminate unnecessary waste and increase productivity. You need to focus on eliminating unnecessary waste and increasing the efficiency of the existing systems. The release time of a new product, the quality and use of resources become extremely important. There is a need to introduce relevant metrics to assess productivity and the speed of provision of IT services (including the duration of development and implementation), reduce the processing time of user requests, and integrate IT assets.
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Stage 3: Rationalization.
Business benefits and readiness for change. IT activities must be consistent with the goals and priorities of the business. IT performance assessment methods should be linked to business unit performance indicators. Such an analysis includes an increase in new users, satisfaction of current and planned customer expectations, and a reduction in the time it takes to market a product.
Stage 4: Transformation.
More investment for more optimization. With the improvement of economic indicators, management focuses on long-term measures to improve IT and business processes, which will allow them to gain a competitive advantage in the market. With an increase in IT investments aimed at transforming the organization’s business, the overall share of the costs of maintaining the business will remain unchanged or decline with ever-increasing productivity.
The goal is to save money and avoid new costs while taking steps to reach a healthier and more competitive position. Resist the temptation to cut strategically important technology tools, as these investments can be critical while rebooting your company.
Over time, organizations are beginning to realize the benefits of investing in long-term cost optimization measures. For example, cloud services seem overly costly, but they pay off in the long run due to operational and financial flexibility.
How Do You Know It’s Time to Maximize Your IT Resources?
Often the concept of “optimization” in relation to IT infrastructure is understood as the need for a solid investment. But successful market examples prove that “optimization” is not equal to “high spending.”
The condition for effective optimization lies not so much in acquiring the most powerful and functionally rich IT products as in their prudent application.
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A special role is given to tools for monitoring and analyzing IT infrastructure, using which the company will be able to rationally use computing, and ultimately financial resources to carry out various tasks. Optimization of the current infrastructure will result in a significantly reduced maintenance budget. At the same time, the released funds can go towards the development of innovative areas.
The path to proper cost reduction should begin with a comprehensive benchmarking methodology. It should be evidence-based and cover the big picture. To find out if your business needs optimization, ask yourself a few questions.
- Remote office. Is the remote work efficient? Is the basic level of necessary infrastructure and security ensured?
- Outsourcing agreements. Are your current contractual obligations fulfilled? Is there a decrease in productivity among employees? Should service contracts be reviewed in exchange for price concessions?
- Get rid of obsolete technology. Are there any types of work or functions that can be immediately removed, modernized, or automated to reduce costs and increase productivity?
- Intelligent Automation. Do you use new technological developments, including artificial intelligence and process robots?
- Cost optimization. Are costs redistributed in favor of priority projects?
It is important to remember that any system can be optimized. But don’t start a “process for the sake of the process” if the interests of your company do not require it.
A crisis is a time when you need to act decisively. Cost optimization in IT is an improvement process that is relevant even in a turbulent economic situation. If you feel that the moment has come, contact us!
Gravum gives preference to the most modern technologies, and we will reboot your company with the help of best practices and safe solutions. All our intellectual capital and rich practical experience will work on solving your cost optimization problems!