The trend of companies undergoing a digital transformation to meet consumer expectations has ramped up over the last several years. Forecasts show the projected spending on digital transformation efforts could reach $3.4 trillion by 2026.
Digitization has become so popular that IT expenses are ballooning, which top management should be wary of. Learn how to reduce IT costs through different strategies in this blog.
How to Analyze Your IT Expenses
The first step to reducing your IT costs is examining your current expenses. The insights you gain will help you intelligently formulate a cost-reduction plan. Here’s a step-by-step guide to analyzing your IT expenses.
1. Identify cost centers within your IT infrastructure
A cost center is a department that does not directly contribute to your company’s bottom line but costs money to maintain and run. Prime examples are your HR, accounting, and IT departments.
Looking strictly at your IT infrastructure, these cost centers may come in the form of organization intranet, devices used by employees, and IT technicians. Still, these assets have value in their respective roles, so you must carefully conduct a cost-benefit analysis, as described in the following sections.
2. Understand your current licensing and maintenance fees
To know all your licensing and maintenance costs, you’ll need to take inventory of each hardware and software you use in your IT operations. Then, you can identify potential cost-saving measures from there, like renegotiating licensing agreements, consolidating licenses, or switching to inexpensive alternatives.
3. Evaluate your hardware and software costs
Investing in hardware and software is pricey. However, these are integral to a fully functioning IT infrastructure. With that said, not all of these assets are necessary or are being used properly.
Resource evaluation lets you pinpoint which tools are underutilized or have not delivered the results you want, so you can decide to remove them to stay on budget.
4. Identify areas of redundancy or inefficiency
With technology constantly evolving, it may be hard to notice that some of your tools perform the same or overlapping functions. Moreover, some of these may not be used to their full potential, costing you money without the added benefit.
Audit your software inventory and list its functions to avoid redundancies and inefficiencies. From there, you can consolidate your workflows to a few selected software and implement a uniform use of applications and services within your organization.
You may also decommission legacy systems since they are expensive to maintain and upgrade.
5 Strategies for Reducing IT Costs
Effectively reducing IT costs is a critical challenge many organizations face, mainly as businesses rely more on technology to power their operations. Fortunately, there are methods you can adopt to help you decrease IT-related expenses without compromising efficiency. This section will discuss how to reduce IT costs using the following strategies.
1. Consolidate and streamline your software and hardware
Your company’s IT infrastructure can become bloated over time as different departments introduce more tools into their process. As such, you might be paying for software or hardware with the same function.
To decrease IT costs associated with this, you may consider consolidating and streamlining these resources. Actively standardizing platforms, applications, and devices reduces the need to pay for multiple licensing, maintenance, and support agreements.
An effective way to do this is to purchase an application tool suite that gives you access to a collection of programs in one interface. In terms of hardware, you can migrate network services and applications from multiple servers to a virtual machine.
2. Embrace cloud computing
Cloud computing is an on-demand delivery of different IT-related resources through the internet, letting you access multiple applications and information from physical computers, databases, and servers.
Cloud computing services are less expensive than on-premise infrastructure, as you do not have to invest in valuable office space just to host servers.
3. Utilize open-source software and tools
Open-source software and tools are programs developers distribute to the public containing their source code. They’re often free, and with the program code intact, you can use, distribute, and modify it with its original rights.
There are so many tools out there that can elevate an IT infrastructure to be more efficient. Unfortunately, buying proprietary tools is expensive. With open-source software, you can utilize database solutions like project management and asset management programs and alter them according to your needs.
4. Implement energy-efficient hardware
Most IT systems feature physical servers that host various software applications and services. While these high-powered machines can endure a large volume of processing, they can also incur significant expenses in maintenance and updates.
You can choose from various economically-friendly devices to replace this energy-consuming hardware, like low-power processors with optimized power supplies. For storage, you may opt for solid-state drives (SSD) that need less power and boast faster access times than traditional hard disk drives.
With these less resource-intensive devices, you can save on costs associated with energy and maintenance.
5. Outsource IT functions to a managed service provider
If you want to maximize savings without compromising quality, you can always enlist the help of a managed service provider. MSPs are third-party organizations that provide IT services to companies.
They specialize in managing and monitoring a company’s IT infrastructure, networks, and systems. Furthermore, they offer services such as data backup and recovery, network security, help desk support, and software updates, among many others.
MSPs provide these services remotely or on-site and can be a cost-effective way for your business to manage IT needs, as they offer a more efficient and streamlined approach to IT management.
Additionally, MSPs can help your company stay up to date with the latest technology trends and provide proactive maintenance and monitoring to prevent issues.
The Ideal IT Infrastructure
Reducing IT costs can be daunting, but it’s essential to maintain your business operations effectively in today’s technology-driven landscape. Fortunately, adopting cost-effective strategies like consolidation, cloud computing, and outsourcing will allow you to remain efficient while spending less.
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