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November 20, 2018

Cutting Costs in the IT Department: How Do You Do It?



IT Expenses Weighing Down Your Budget? Here’s How You Can Save

In order to run a successful business in today’s modern age of technology, large corporations need smooth and robust IT departments. But maintaining a thriving IT department is also expensive. To achieve the results you want within your organization, you may need to think long and hard about cost-cutting initiatives for your business.



5 Ways You Can Cut Costs

When the economy is booming and business is thriving, it’s easy to get a little too rich for your own good. You start to feel invincible and make choices that ultimately set you up for disappointment and failure in the long run. So even though things may be going well for your business in the moment, remember that the economy is cyclical and every organization experiences rough patches along their journey. By maintaining a lean IT department, you can weather rough storms and come out safe and sound on the back end.

Wanting to be lean and achieving being lean are two very different things. Here are some practical steps you can take towards cutting costs within your IT department:

1. Eliminate Discretionary Spending

The first thing to do is stem the flow of discretionary spending and stop the bloat in your budget.

By definition, discretionary spending is anything that’s a non-essential expense. This includes silly, superfluous things like bringing in coffee and donuts every morning to more valid costs like contracts with non-essential service partners.

“Even if you've made a contractual commitment to spend money, you can try to negotiate your way out of it,” attorney Bethany K. Laurence writes. “If you are willing to pay a reasonable buyout fee, it's legal and honorable.”

2. Purchase Refurbished Equipment

Hardware costs within the modern IT department can be astronomical. And while you may be justified in buying a piece of equipment, it becomes obsolete at a much faster pace than ever before. An investment in the latest, greatest widget today could prove to be worthless in 18 months.

If possible, find ways to think strategically and save on equipment. Believe it or not, buying refurbished routers and switches, among other equipment, can save you money and allow you to remain highly competitive. You won’t be able to buy everything refurbished, but a few well-timed investments here and there can create some breathing room in your budget.

3. Address Duplication and Trim Fat

It’s amazing how many IT departments around the country are paying for services, tools, and systems that they really don’t need. Duplication is overwhelmingly common and needs to be confronted within your own organization.

“When mergers and acquisitions occur, ensure you’re not bringing in added costs that your company is already paying for, and eliminate what you don’t need. Make sure you retire legacy tools when you upgrade to new platforms,” writes Jonathan Blackwood, managing editor of TechDecisions. “Portfolio management can help reduce duplication by putting all of your costs in a central location to view. Dropping from multiple vendors to a single vendor can help ensure you’re not getting duplicate software or tools.”

Trim fat anywhere you find it. A little bit here and there might not seem like much, but it all adds up at the end of the day.

4. Deal With Personnel Costs

“Many IT organizations are top-heavy with personnel which is something that just happens over time,” IT advisor Bob Ronan explains. “While having experienced people makes it easier to get the work done, it is suboptimal from a cost standpoint. To deal with this, some organizations have periodic reductions in personnel to move their job levels back to reasonable levels.”

To put things into perspective, consider that 37 percent of the average IT budget is spent on people – including money paid to contractors. And though you need people to thrive, personnel costs can put the rest of your budget in a tight spot.

If you don’t feel like you can afford to fire people, perhaps you could tweak some policies and encourage certain employees to work remotely. Doing so can save you a considerable amount of money on office space, computing power, and other on-premise resources.

5. Keep Your Head in the Cloud

You’re obviously already heavily involved with the cloud, but there are probably some ways you can save even more by virtualizing additional processes.

Over a 13-year life cycle, the total costs of implementing and maintaining a cloud environment can cost two-thirds less than a non-virtualized, traditional data center. Keep this in mind as you consider shuffling some things around.

Be Careful What You Wish For

There are tremendous benefits to maintaining a lean IT department, but don’t confuse the idea of lean with the notion of cheap. Too much cost cutting in the wrong areas will expose you to dangerous vulnerabilities that could ultimately come back to cost you way more than you originally saved.

When businesses strip down the IT department without a sound strategy, they typically erode the security and integrity of core systems. This can increase the risk of experiencing a data breach, which is becoming increasingly expensive as the years pass.

According to the thirteenth annual study on the topic by IBM (News - Alert) Security and Ponemon Institute, the global average cost of a data breach is $3.86 million, which is up 6.4 percent from 2017. The average cost for each lost record containing sensitive information is $148 per record.

For American companies, the reality is even starker. The average cost for data breaches in the U.S. is an astonishing $7.91 million, which far outpaces the second-place country, Canada, which sits right at $4.74 million.

When it comes it cost-cutting, don’t skimp on security. In fact, you should give serious consideration to hiring a cybersecurity professional who can help you develop and maintain a robust network security program that keeps threats at bay. Nothing can make you immune, but the stronger your safeguards and systems, the less likely it is that a simple attack will put your organization in danger.



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