How to Curb IT Costs for Your Business
Keeping your company’s IT department running in tip-top shape is necessary, yet expensive. Walking the line between spending enough and spending too much isn’t always easy. Do you know how to cut costs without exposing your businesses to inordinate amounts of risk?
Calculating the True Cost of IT
Most businesses seriously underestimate how much they’re spending on IT. This is typically the result of a failure to consider the total cost of ownership (TCO).
TCO calculations take into account all of the direct costs (hardware, software, monthly subscriptions, etc.) as well as the indirect costs (such as downtime and end-user operations). Because the indirect costs can be challenging to calculate, TCO is generally overlooked and under-budgeted. This results in inaccurate IT spending analysis, which hurts the budget, bleeds money, and leads to complications downstream.
To get an idea of how much you may be underestimating IT expenses, consider the example of a simple computer that’s purchased for the office.
“Most organizations believe their direct costs end at the point of purchase,” Network Alliance explains. “However, research shows that a computer’s base price typically represents less than 20% of its TCO, with technical support, maintenance and labor costs accounting for the remaining 80%. These aftermarket expenses represent the greatest piece of the TCO pie and should therefore warrant the highest levels of scrutiny.”
While a single computer isn’t going to throw your entire budget out of whack, this should give you an idea of how important it is to calculate TCO for all IT investments. It should also show you just how expensive your IT investments really are. From computers to servers to SaaS (News - Alert) subscriptions, the costs add up to a figure that’s much higher than most businesses realize. Finding a way to reduce these expenses to more manageable figures is paramount to your department’s long-term health.
5 Ways to Reduce IT Costs
If you’ve never enacted a cost-cutting strategy within your IT department, you’re almost certainly spending more than you should. How much you’re able to reduce IT costs by will depend on a myriad of factors, but here are some specific tips worth looking into:
1. Install Solar Panels
One of the TCO elements you have to think about is power – i.e. your utility costs. Keeping servers, computers, and data center equipment up and running requires a lot of energy, which can be quite expensive.
In addition to discovering ways to limit your need for power, you should also seek out alternative energy sources. Not only could this prove to be cost-effective, but it could also enhance your brand’s image in the eyes of environmentally conscious partners and consumers.
Solar is one of the more practical solutions. As solar has become a more popular alternative energy source over the past few years, solar developers have been able to achieve economies of scale. This has lowered the cost of installation for businesses and made it a financially feasible investment for companies that want to move away from traditional/expensive energy.
While solar power is currently the most popular option on the market, you may also consider looking at renewable sources such as wind energy, biomass energy, geothermal energy, and hydroelectric power. Many of these come with tax credits and government grants, which makes them even more affordable.
2. Pay Attention to Hiring and Turnover
As your IT department grows, human resource expenses can really add up. By paying attention to your hiring practices and attempting to mitigate turnover, you can save some money in this area.
In addition to carefully monitoring full-time employees, you also need to keep close tabs on any outside contractors you use. It’s easy to bleed money here by not subjecting contractors to the same scrutiny as salaried staff.
“To make sure your organization is focused on the expense associated with contractors, publish a count of the number of contractors you have, the amount you are paying them and how much overtime they are working (another hidden cost),” IT advisor Bob Ronan suggests. “This visibility will encourage better management of these resources.”
3. Outsource Time-Consuming Tasks
Speaking of outside contractors, it’s often cost-effective to outsource time-consuming tasks so that your employees can make better use of their time and expertise.
When outsourcing, focus on non-critical tasks and be sure to limit the access and authority these contractors have significantly. The cost of a data breach or compromise will significantly override the savings of outsourcing a particular duty. (If you’re unsure of how to proceed, it’s probably best to keep the task in-house.)
4. Try Containerization
Have you looked into the possibility of pursuing containerization in your IT department? You may find it to be more secure and cost-effective.
“Containers isolate applications from the environment they reside in, making them stateless. In a container environment, you install only what you need to run an application, nothing more,” IT director, Joe Hertvik explains. “Containers can be deployed quickly inside [virtual machines], in the cloud, or inside a physical machine, providing a separate application and network environment without running a [virtual machine] for each application. A container’s smaller infrastructure footprint provides a more secure and easier to configure environment.”
5. Renegotiate Existing Contracts
If you don’t ask, you never know what’s possible.
Take time to review your existing contracts with vendors and see if there’s any way to lower your costs through discounts, specials, or changes in service. Many vendors will be willing to work with you in order to secure future business.
Set Your Business Up for Success
Managing a successful IT department in a modern business isn’t cheap. And you certainly don’t want to cut costs at the expense of quality, security, or efficiency. However, you have ample opportunities to cut costs without negatively impacting your overall business operations.
Spend some time mulling over the tips and strategies highlighted in this article. You’ll find that some of them are possible, while others aren’t applicable. Tailor a cost-cutting strategy to your specific needs and track the results. You may be pleasantly surprised by the results.
