IT leaders often face the difficult task of making budget cuts. Whether those cuts are big or small, careful consideration is always needed. Fair or not, people outside of IT often view the department as a particularly costly area. In this guide, we’ll explore some IT cost reduction strategies you can consider to optimize your IT department budget in the short- and long-term.
Navigating IT Cost-Saving Initiatives
IT teams are balancing keeping operations running smoothly while also delivering value. Since company leaders view IT as a costly area, CIOs and team leaders often search for new ways to reduce waste and overall expenditures. But IT cost cutting is much, much easier said than done.
So, let’s first address the impact of IT spending on a business’s financial standing.
The Business Impact of IT
Undoubtedly, IT departments incur unavoidable operating expenses–such as cybersecurity investments–necessary to support smooth-running operations. At the same time, a portion of the IT budget may go to waste due to inefficiencies or poor planning.
Before implementing cost reduction initiatives, business leaders should know the top spending areas and budget waste categories for IT departments. These include:
- People and Services: 25% of IT spend for global companies (Statista)
- Hardware: 17% of annual IT spend, on average (Flexera)
- Software-as-a-Service (SaaS): Average of 19% of annual IT budget (Flexera)
- Cybersecurity: 80% of CIOs plan to increase investment in cybersecurity in 2024 (Gartner)
IT Cost Reduction Strategies: 7 Ways to Reduce IT Costs
If you’re only interested in reducing IT costs in the immediate future, you can start by reprioritizing operations and investments. When your budget is tight, you can temporarily reduce or rearrange basic housekeeping expenses like training, travel, and office supplies to save money quickly. You may be low on pencils for a few weeks, but you’ll make it through.
However, if cost reduction is a long-term goal for your business and IT department, you can’t simply slash spending and call it a day. Instead, you need to look at your current spending trends to determine how to run your operations, infrastructure, and data more efficiently.
When optimizing IT expenses over the long run, there are many areas to consider. Each of the following cost optimization strategies offers ways to unlock both immediate and long-term savings.
1. Standardizing and Simplifying Operations
IT leaders should begin strategic cost reduction measures by right-sizing and simplifying operations wherever possible. This strategy can help trim unnecessary expenditures and cut costs on redundant services, devices, or software.
You shouldn’t be so eager to cut operating expenses that you eliminate necessary resources employees rely on to complete their work. However, a recent survey of IT professionals from Freshworks found that the number of applications employees use increased 71% over the past year, with 36% saying that most of the software doesn’t help them work.
- Short-Term Cost Cutting Idea: Reduce unused seats or software licenses on applications, limiting them to essential personnel.
- Long-Term Budget Optimization: Track device, application, and software utilization to determine which you can eliminate or consolidate without detracting from productivity.
2. Modernizing Outdated Hardware and IT Infrastructure
Though it may seem counterintuitive, one way for CIOs to save money is by investing in modern technology and infrastructure. It’s common for organizations to run on a decades-old network infrastructure that technically still works—but not nearly as well as it should.
Outdated technology can cause significant inefficiencies within your IT department. Discovering where to make upgrades can help you streamline clunky business processes that weigh on the IT budget and productivity.
The price of replacing outdated infrastructure, such as servers, storage systems, routers, or switches, might sound high. However, by crunching the numbers on the total cost of ownership and considering modern solutions, you may find it more cost-effective to upgrade to new, higher-performing equipment.
- Short-term Cost-Cutting Idea: Lease new hardware to save on the upfront investment costs required to purchase it outright.
- Long-Term Budget Optimization: Create a regular schedule for proactively upgrading outdated hardware and network components to avoid costly downtime and the high cost of maintenance.
3. Making Work Cloud-Based (and Controlling the Costs)
According to Statista, the global public cloud services market is estimated to grow by 20.4% ($675 billion) in 2024. So, why are so many businesses quickly jumping on the cloud computing bandwagon? There are many reasons, many of which involve their cost-saving strategies.
By relying on the cloud for document sharing, storage, communication, and digitizing documents, you can reduce business expenses. These solutions can help your team work faster and more efficiently, by freeing up physical storage space to better support activities that directly contribute to your bottom line.
- Document Sharing: With a cloud-based document storage program—which can be as simple as PDFs in Adobe Cloud or as robust as Laserfiche—your workflow will become faster and more efficient.
- Storage: Say goodbye to rooms full of filing cabinets, storage containers, and manila folders. With digital tools like Dropbox or Google Drive, you can repurpose that space for things that drive revenue, like product inventory or additional workstations to expand your team. Plus, you may no longer need to purchase office supplies like paper, folders, or filing systems.
- Communication: With cloud-based systems like Slack and Microsoft Teams, communicating important information with your team is quicker, easier, and boosts productivity, which usually means higher revenue.
Switching to cloud-based services means less reliance on paper and paper products. Reducing paper will save money and, as an added bonus, make your office more environmentally friendly.
- Short-term Cost-Cutting Idea: Transition your team’s document management systems to cloud-based solutions to reduce physical storage and printing costs while improving accessibility and productivity for remote teams.
- Long-Term Budget Optimization: Monitor your usage of cloud solutions over time to ensure you’re only paying for services you actually need.
4. Outsourcing IT Services, Like Print Management
We’re a print management service provider. Of course, we’re going to mention how integrating managed print services (MPS) into your IT strategy can help make you more efficient, ultimately saving you money. But, don’t just take our word for it.
According to IDC Research, businesses can save as much as 30% annually with MPS.
How? An experienced team knows how to expertly consolidate your print fleet, make your workflows more efficient, reduce overhead costs, and help you stop having your IT department waste time on device maintenance and many more resource-intensive tasks.
- Short-Term Cost-Cutting Idea: Consult with an outsourced provider to help you renegotiate pricing and terms on current service contracts.
- Long-Term Budget Optimization: Outsource critical functions like device maintenance, helpdesk support, and more to an experienced MPS provider to improve the efficiency and cost-effectiveness of your internal IT team.
One key benefit of managed print services is the potential for immediate cost reductions in both labor and equipment. The bigger picture advantage is that it allows the IT department to focus on more important and engaging tasks, rather than dealing with printer issues.
After all, about 50% of help desk calls are printer-related.
Outsource for efficiency gains with Managed Print Services from imageOne.
5. Exploring Automation and Software Solutions
Automated solutions ease your reliance on manual labor for repetitive IT tasks and complete them faster and more efficiently. Teams can concentrate on more strategic work by automating tasks like password reset services, access logging, reporting, and data backups.
Automated IT solutions not only help streamline processes, they can also reduce or even eliminate costly human error, providing further room for savings.
- Short-Term Cost-Cutting Idea: Implement workflow automation tools to handle recurring and repetitive tasks like data entry or report generation.
- Long-Term Budget Optimization: Consider investing in more advanced robotic process automation (RPA) to handle complex IT functions, improving accuracy and efficiency over time.
6. Embracing Telecommuting and Remote Work
If a typical business allowed employees to work from home just half the time, it would save about $10,000 per year per worker based on real estate costs alone! And it adds up fast if you also account for potential reductions in expenses like utilities, janitorial services, office supplies, coffee and snacks, office equipment, and travel subsidies.
However, overhead reduction the only benefit that telecommuting can produce. According to a study by the University of Illinois, remote workers reported higher job satisfaction levels and more positive attitudes.
What does this mean? Working from home can reduce the high price of employee turnover, save employers plenty of money, and keep your best employees happier, more productive, and less stressed.
- Short-Term Cost-Cutting Idea: Implement a hybrid policy that only requires employees to work in the office part of the week and start saving on utilities, supplies, food, and beverages.
- Long-Term Budget Optimization: Consider going fully remote to downsize or eliminate physical office space, decreasing the need for on-site infrastructure and technology.
7. Resisting Cutting People Costs
One area where you should tread carefully, though, is people costs. It might seem like an obvious place to start if you’re looking to lower costs. But do resist jumping right to layoffs or slashing year-end bonus until you’ve looked at all other options.
Otherwise, you can create morale-dampening side effects that impact your team’s productivity and satisfaction, which may lead to costly errors and absenteeism. In other words, layoffs may produce the opposite effect you wanted.
- Short-Term Cost-Cutting Idea: Freeze ongoing hiring efforts to save on recruiting and training costs without reducing your current staff.
- Long-Term Budget Optimization: Invest in top talent to encourage better innovation and leadership, which can lead to more efficient and cost-effective work.
Outsource MPS with imageOne for IT Cost-Efficiency
Gartner expects Global IT spending in 2024 to grow by a staggering 7.5% from last year. IT leaders must work hard to identify and eliminate unnecessary expenditures. The enterprise cost reduction ideas provided here will help you allocate your resources within your budget more strategically.
What about printing costs? Learn how to reduce printing costs for more cost-cutting IT ideas.
By partnering with imageOne as a trusted MPS partner, we can provide you with personalized recommendations on reducing inefficiencies, tracking KPIs to monitor IT department success, keeping costs low, and learning how to control your print process.
Contact the imageOne team and let us show you how!
Set up a free, no-strings-attached consultation today.
