13 IT Cost Reduction Strategies

[Updated July 2020]

Whether you’re a small business owner or an enterprise executive, the costs of running a business continue to increase year-over-year, especially when it comes to information technology. By the end of 2019, 44% of businesses were expecting to increase IT spend again in 20201.

Now—in an economy trying to recover from the COVID-19 epidemic—budgets are even more strained and IT cost reduction is even more important.

Some IT spend will inevitably continue to rise over time, but there are a number of IT cost reduction strategies that savvy CIOs and IT managers are already exploring. Everyone wants to keep teams working and business running as much as possible, so start with some of these cost savings ideas.

preventing adapter theft

1. Virtualize machines.

Virtualization is an IT cost saving strategy for any size company. It is, essentially, the use of special software that enables one set of hardware to function as more than one computing environment. One server acts as multiple servers; one PC can be the machine that accesses multiple “virtual machines”—sets of operating systems, apps, etc.

Virtualization is helpful in reducing information technology costs, because it:

  • Allows your team to add databases or applications without buying more hardware.
  • Reduces energy consumption and costs.
  • Reduces technology maintenance costs.
  • Stretches the IT budget.
  • Reduces IT expenses in case of a security breach.

2. Secure the items that get lost or break most often.

Identify those specific, “vulnerable” items that tend to grow legs, so you can prevent them from being lost or broken. Smaller items, like pens and sticky notes are hardly a concern, but some other small office items represent larger price tags.

For example, Joe Neto, Creative Services Specialist at Stanford University, noticed that cable adapters were disappearing on a regular basis, and, “the cost to replace the missing adapters was beginning to add up.” Beyond the financial cost, the university (and its professors, staff, and students,) found themselves at a loss for time, efficiency, and teaching opportunities.

Once they identified the problem, they were able to investigate possible solutions. Joe’s team realized that cable security tethers could eliminate this issue almost entirely. Their adapters no longer went missing, which ultimately saved money.

boxes of HDMI adapters and USB-C adapters

3. Embrace the cloud.

If you haven’t yet, it might finally be time to move (more) to the cloud. Cloud computing can improve IT cost savings in several ways:

  • Reduce equipment and all of the expenses that come with it: the facility costs of server rooms, the hardware itself, maintenance, repairs, etc. Let the vendor deal with all those expenses.
  • Monitor capital investments by scaling down your investment in slow seasons, when you don’t need as much storage or computing power. Most cloud services operate on a pay-as-you-go system.
  • Reduce IT’s business op spend by putting software updates, security routines, and hardware upgrades in the vendor’s hands. That frees up your team to focus on more important, innovative, business-growth work.

The cloud will also help make extended remote work a possibility (which we’ll talk about shortly), because you don’t need as much personnel on-premises for maintenance and up-keep.

4. Invest in good equipment.

Although it may seem like the cost-effective path, selecting low-quality or cheap products often leads to increased replacement costs. That AmazonBasics USB cable, for example, will likely conk out before an Apple one does. Instead, if you invest a little more money and select higher quality items, you won’t need to replace them as often, if at all.

In addition to long-term savings, investing in good equipment is an HR move as well. We’ll talk more about the value of employee retention later, but attracting and keeping the best IT team doesn’t happen if you’re asking them to work on cheap equipment.

5. Cut way back so you don’t have to do it again.

Keep going! It’s tempting to cut back enough—enough to report a big reduction in costs or enough to hit a target that was set. But don’t stop yet.

Lots of CIOs and IT managers cut spending enough “for now,” but then find themselves repeating the process six or nine months later when more cuts are necessary. Explore all of your options and reduce as much as possible now, so you don’t have to do this again any time soon.

6. Audit software licensing.

Many organizations can reduce up to 30 percent of their information technology spending by auditing and optimizing software usage. Start by compiling a complete list of software and cloud applications being used, noting who is using them and for what purpose(s). If there are multiple locations, as for a list from each one.

Review the collective findings and look for ways to cut costs and reduce spending, such as:

  • Decommissioning unused software or licenses.
  • Consolidating applications where two or more are running for similar purposes.
  • Optimizing software configurations.
  • Recycling unused software license rights.

Most of these issues represent simple oversights where companies have grown, teams have evolved, and personnel have changed over the years. If you find that it’s too big of a project to do manually, consider an SAM tool.

7. Shop around and negotiate.

Whether it’s part of reviewing existing licenses or investing in new software or gear, it’s okay to let vendors know you are shopping around. This is especially important if you’re a large purchaser, buying hundreds or thousands of items each year. Be clear that you want to identify the best product for the best price.

If you get a quote from your vendor, shop your quote around. It behooves you to spend some extra time, reaching out to a few other vendors for comparison. Even if you have a specific vendor in mind that you prefer working with, you can use a competitors quote as leverage.

8. Try open source software.

As you audit software licensing and consider alternatives, don’t forget about open source software options. OSS is not new, and has, for decades, been earning a reputation as a beneficial alternative to proprietary technologies.

One of those benefits is IT cost savings, primarily because most open source software is free to download. Because of its “open” nature, OSS can also be adjusted and customized to meet any need the organization has. And because of its very enthusiastic fan base, finding support and help for managing open source software is a search engine away, freeing IT departments from relying on vendors and busy customer service centers.

9. Share best practices across locations.

If you have multiple office locations or campuses, ensure that your IT managers are sharing best practices. Encourage them to document what they’re doing and how they’re saving money, so people can learn from one another.

A simple way to facilitate those conversations is an internal wiki. From large brands like Atlassian and Lyft, to small businesses in every industry, use internal documentation to list and share best practices, approved vendors, etc.

Not only will this help with consistency across the company, it will also be easier to manage costs and identify where reductions or savings are happening.

10. Track your inventory and vendors.

If you don’t already have one, create an inventory of everything you buy and from whom. Maintain a document or spreadsheet with vendor names, products, and quotes. This will allow you to easily compare offerings across vendors. It can also be used if you need to reference any past quotes when speaking with current vendors.

Furthermore, this intel can be shared across office locations to avoid duplicate work. Perhaps each location of your business orders hardware and software separately, for example. Though this may be easier in the short-term, it likely costs money in the long-term. Consider aggregating some of your purchases for greater capital efficiency.

11. Standardize the IT infrastructure.

In addition to sharing best practices, many of these updates and strategies can be standardized across the IT team(s) to make operations processes more efficient. Set up the same virtual machines on every computer, secure the same cable adapters in every office or meeting space, standardize the same software for every team member in every location, etc.

Establishing and maintaining a standard infrastructure will make collaborative efforts more efficient, allow for shared best practices to produce similar results, and streamline training—whether you’re training existing team members on new processes or on-boarding new staff.

12. Embrace remote work long-term

Though this option might not be possible for all teams, it’s one worth considering.

UPDATE: It’s no understatement to say that the COVID-19 epidemic has changed everything, including how most of us do business. Works teams of all kinds have discovered ways to work remotely—even where they thought it could never work.

Remote work has always offered a win-win situation for the business and employees. It reduces IT costs, because fewer people need to use the conference rooms and the equipment. It also cuts down on usage of office equipment, improving durability and longevity.

It’s a win for employees, because many prefer the option of working from home—with all the personal benefits that come with it. Recently, 60% of American working from home said they would like to stay there as much as possible, even after companies start to reopen.

If your state and/or your company are starting to plan for re-opening, conduct a careful audit of what your remote IT team has done well. Consider keeping the team remote, except for those situations where they really are needed in-person.

13. Reduce turn-over.

Embracing more remote work may also help improve long-term cost savings by reducing employee turnover. Most IT staff have always favored employers who allow at least some remote work, and they’re about to have their pick of companies to work for.

Twitter already announced that employees who wish to continue working from home will be allowed to do so “forever,” and Facebook quickly made a similar announcement. The tech giants are leading the way, but as of April 2020, about one in five companies were already talking about how to expand remote work options.

Attracting and retaining good IT personnelle may very soon have a lot to do with remote work options, but there are other considerations as well. The point is: Employee turn-over is expensive. Check on your team.

clickshare dongle security

IT Cost Savings Starts Now

Some operating expenses and IT spend will always continue to rise, but those increases can be offset—and even overcome—with some careful cost reduction strategies. This contributes to the overall health and efficiency of the company, and is especially urgent as many businesses work hard to maintain operations.

Furthermore, these strategies save employees the frustration of going without the tools they need to do good work. They ensure everyone can focus on the jobs to be done, rather than trying to hunt down equipment that the company has lost or can’t afford. These practices are an investment in employee productivity and satisfaction.

1 The 2020 State of IT