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Tips to reduce operational costs: Reviewing your IT expenditure.

Lean Budgeting, Part 1: Limitations of Traditional Budgets - Blog ...

Let’s face it, we are living in different times. Most of our plans have gone out the window and our priorities have changed. As a result, it’s more important than ever to ensure that all of your business outgoings are reviewed and decreased where possible. IT is often a complex area in which to review costs, the savings though can be much greater than most expect.

A good place to start is to ask yourself the following questions.

‘Are you current with what value for money looks like in IT?’
‘Are your businesses costs growing for IT year on year?’ 
‘Do you have the correct resilience and redundancy for your IT systems?’ 
‘Do you understand the assumptions that have been made in your budget?’
‘Does the IT budget fit your businesses business plan?’

The first part of the process is having an IT budget assigned, often businesses have complex IT implementations which may feature shadow IT. As a result, you must review or create your budget with this in mind. A good place to start is to create a document outlining all your IT services, the providers, contracts and costs. Missing shadow IT is far too common, and it will significantly impact your cost savings should you miss it! 

Now that you have defined a budget and listed the areas in which your business is spending on IT services, it’s time to review. Are there duplicate services in play? Great example – Does your business have several users making use of Teams and others making use of Webex? You need to dig into these areas to understand the reasons for having multiple products or services offering the same features. Once you ascertain their purpose you can review and examine if consolidation is possible. This is the place where shadow IT starts to make an impact. You will often find with software as a service platforms that the more licenses you purchase the lower the individual license price. Moreover, consolidating on technology will make support far simpler. 

Once you have a defined budget and service list its time to check the legal side! It’s important to now make note of each contract in play and its expiry date. Take note on your terms and conditions to terminate the service. You might find that you need to give anything from 5 – 180 days’ notice. Often contracts will also auto-renew for another 1, 3, 5 or even 10 years! Not having this documented in an easy format to review often is a recipe for disaster. It also provides valuable insight into any costs incurred for terminating a service and brings up questions like “How do I export the data?”. This is where you can also end up in hot water. Some companies will charge you to export your data, and the costs are normally higher than a renewal (You can often negotiate this price), the goal here is to stop you from leaving. Put simply ensure you are reviewing your terms and conditions as part of your budget/cost reduction process.

Right so now we have the data, let’s start reducing your costs. A great place to start is with software licensing. Simple things like if you are using Office 365 do your users have the correct license. You might find that moving to a business premium package rather than E3 for instance, still offers the same features but at a lower cost. It all depends on what services and features your users require. However, get it wrong and you could be spending far more than you need to. This is the same across the board, look at all your licenses and adjust where necessary. 

Whilst software can often yield great results in cost reduction, data centres, clouds & connectivity can often provide greater savings. Much like the suggestions in the software review above, you are going to want to remove duplicate or unnecessary services. Also, it’s worth noting that renewing your agreements for data centres & connectivity can provide significant cost reductions. Ensure however that you review offerings from competitors, you will often yield a better deal from swapping to a new provider. Finally, cloud computing needs to be reviewed. If you are heavily invested in the cloud, then it’s important to ensure your architecture is designed to exploit the cloud from a cost perspective. We touched on this in a previous article which can be found here.

The final part of the process is to bring all of this together as a 12-month road map. Tie together contractual end dates, implementation of new services, migrations and provide a clear business operational IT roadmap. You should also be able to demonstrate the areas in which costs will be reduced and what the totals of these savings will yield over time. More importantly, keep all of this data together, it will allow you to quickly review the state of your current agreements and when best to review them. The first time you pull all of this together is the most complex. Once you have the data it’s just a case of updating it as you progress on your roadmap.

In conclusion, we marked the following milestones to progress with a clear IT budget with a goal of cost reduction:

  1. Build a list of IT services and their costs.
  2. Build an IT budget.
  3. Pull together all of your existing agreements.
  4. Use this data to review services and reduce costs where applicable. 
  5. Build a 12-month roadmap
  6. Keep all of this data together and accurate!

At Next2IT we love to help our clients reduce their operational costs. Why not have Next2IT provide a digital economics report to find out how much you could be saving today!