An impending recession has companies scrambling for ways to reduce operational costs, including those associated with IT. While IT spending is still expected to rise in 2008, reducing unnecessary expenses is a perennial quest for IT managers. Fortunately, there are some strategies for cutting costs that your company may not have implemented yet.
Put Your House in Order
The first step in cutting IT costs is to look at what your business is currently doing. A comprehensive review of IT infrastructure and processes can reveal areas in which things can be done more efficiently. Cleaning up clutter and revising IT management practices can translate into big savings.
Create a software-inventory database. Assessing your current portfolio of applications may highlight little-used systems that can be safely eliminated. It can also spotlight redundant systems, such as two different CRM applications used by two different departments. Consolidating systems can result in savings on licensing fees, support and help-desk calls. Software asset-management tools can help identify systems and their maintenance overhead. Systems that cost more than they contribute to the bottom line are good candidates for elimination.
Consolidate and virtualize servers. Look for opportunities to consolidate applications onto fewer, more powerful physical servers. Companies that virtualize even a portion of their applications can save up to 20 percent on costs associated with hardware, maintenance, power and cooling, according to a Gartner Inc. cost-cutting survey.
Improve IT management processes. Labor accounts for up to 50 percent of IT budgets, according to Gartner research vice president Barbara Gomolski. Adopting standardized best practices for IT management, such as those found in the ITIL (Information Technology Infrastructure Library), can help your company save money by using labor more efficiently. For example, implementing rigorous change-management controls can keep IT staffers from making ill-conceived system modifications that inflate support costs down the road.
Invest in employee retention. Recruiting and training new staffers is expensive compared to the cost of training and career development. Employees are more likely to stick around if they have opportunities to learn new roles and skills. Plus, a team of generalists is more flexible; companies can redeploy existing employees as needed instead of hiring new staff or consultants.
Develop custom applications in-house when feasible. Commercial software often contains features that businesses don't use yet still pay for. Custom applications tend to be simpler, requiring less maintenance and support. They also reduce training costs and calls to the help desk.
Switch to self-service reporting. Many organizations rely upon the IT department to compile and deliver reports to managers. Web-based tools that let managers define and compile their own reports relieve IT of this cost burden.
Think green . Simple steps, like activating the sleep mode on all computers at a company, can add up to significant annual power savings. Replacing power-hungry CRT (cathode-ray tube) monitors with energy-efficient LCDs can help reduce the amount of energy consumed. Converge multiple networks onto a single network to reduce the number of devices, power consumption and maintenance costs. Buy products that perform several functions in one box. Recycle old equipment whenever possible.
Go wireless. The cost of running network cables is high. Wireless networks give a company more flexibility at lower provisioning costs. Your business will save money on materials and much more on labor.
Squeeze Costs Out of Vendors
The following tips can help your company leverage its relationship with vendors in order to save cash.
Switch to Web-based applications where possible. SaaS (software as a service) applications are becoming more common, and they are cheaper than in-house licensing. The vendor takes care of upgrades and fixes, which saves maintenance costs. Your company doesn't need to buy more servers and incur increased datacenter costs.
Consolidate vendors. Managing a large roster of vendors and service providers costs money. Reducing the vendor roster cuts overhead and also positions your company to obtain volume discounts from the remaining vendors.
Become a customer reference. Serving as a customer reference in exchange for reduced rates on licenses, maintenance or services can be an excellent way for a company to save money. Offer to participate in case studies, talk to prospects or join early-adopter programs. The trick is to figure out what's important to the vendor, then propose a mutually beneficial arrangement; customer references can be parlayed into significant discounts.
Position IT as a Money Saver
The following tips can help you demonstrate that the IT department can actually save the company a considerable amount of money.
- When budget-cutting time comes, executives look for cost centers that can be reduced. It is important for IT to emphasize its role as a money saver, not a money pit.
- Every project that your department proposes should be accompanied by a cost/benefit analysis and projected ROI (return on investment).
- Prepare a cost-cutting plan before you need it, and present it to top managers before they ask. The plan should include the names of employees who are on the cost-cutting team. Tie year-end bonuses to the amounts of money that the department saved.
- Enlist a scorekeeper to keep track of IT savings. Report cost-cutting progress weekly. This will enhance your department's image as a money saver.
- Make sure that you don't cut too deeply. Every downturn is followed by an upturn, and you don't want to be playing catch-up when business takes off again. Drastic cuts are sometimes necessary, but if you make cost containment an ongoing process, they should be avoidable.