Are you under pressure to reduce your IT costs? Many CIOs are coming under pressure to reduce these costs. The cost reduction targets you’ve been given may seem impossible to meet. The good news is there are many strategies you can use to cut costs without harming the IT department or the overall company. Which strategies you choose to use will vary depending on the situation at your company and your goals. With that in mind, here are 10 strategies top CIOs can use to reduce their IT costs.
1. Reducing Number of Projects
Some CIOs are reducing the number of IT projects to control costs. To complete projects, you might need to bring on new staff or pay overtime to your existing staff. Cutting back on projects reduces the need for additional labour and helps keep costs under control.
However, you have to be careful about which projects you cut. Projects that could transform the business, like the development of innovative technologies, could be well worth the money. Projects that just support business operations, like upgrading internal technologies, could be put on hold.
2. Reducing Personnel Costs
As you know, your employees’ wages are a big part of your IT budget. That’s why some CIOs are reducing personnel costs to meet their budget targets. Controlling personnel costs can be challenging when your talent needs change from one quarter to the next. If you have enough staff to cover your busy periods, you’ll have too many during slow periods. You’ll have to keep paying your IT employees, even though there’s nothing for them to do. If you have enough employees to handle the slow periods, they’ll be overworked during busy periods. These are stay-awake recruitment issues.
To save money, you can turn to contract staffing. You can maintain adequate staffing levels to handle the company’s slow periods. Contract staffing can then fill in the gaps and help you manage higher-demand periods. It may make sense to outsource contract staffing recruitment to save time and money. When a new project approaches, a technical recruitment company can quickly find contractors for you. When the project ends, you can let them go. This flexibility can help you keep your personnel costs under control.
3. Taking Steps to Lower Turnover
High turnover is expensive. Companies can spend six to nine months of a departing employee’s salary to find and train a replacement. Those costs add up quickly if you have high turnover on your team. To reduce IT costs, top CIOs are taking steps to reduce turnover.
There are many ways to do this. One strategy is to improve your company’s culture to make it a more appealing place to work. Good work-life balance, the opportunity for advancement within the company, and access to training are appealing parts of company culture you could encourage.
4. Performing Less Software Maintenance
Software maintenance can get expensive. In fact, after five years, most companies will have spent more money on software maintenance than the software cost to purchase in the first place. For that reason, some CIOs are performing less software maintenance to reduce IT costs.
For example, instead of paying to upgrade existing software, they could decide to keep using the older versions. This could be a good strategy for you if your software isn’t too old and still meets most of your needs. If the software is so old as to be obsolete, skipping maintenance could end up costing more.
5. Using Open-Source Software
Licensing fees can be expensive, and some top CIOs are switching to open-source software to save money. Open-source software is usually free, so you can save money on licensing fees. Gartner estimates using open-source software can save companies about three percent. That may not seem like much, but when combined with other strategies, it could help you cut costs in your department.
6. Using Less Expensive Hardware
Using less expensive hardware is another strategy for cost reduction. When it’s time to replace your current hardware, look for options that are less expensive. Since hardware lasts for years, remember to think about costs in the long term, not just the initial purchase costs.
For example, it may make sense to purchase Macs rather than PCs, even though the upfront cost for the former is higher. IBM says it saves up to $543 every time it purchases a Mac instead of a PC. That’s because the residual value for Macs is higher in the long term.
7. Encouraging End Users to Help Themselves
Reducing IT support costs is another strategy for cost reduction. Many of the people who contact your IT service desk for help don’t really need the assistance of a paid professional. With IT self-service, as many as 40 percent of people could help themselves. This means you won’t have as much need for Level 1 support and can reduce some costs.
Make it easy for people to find the answers to their problems and help themselves. For example, you could set up an internal self-service portal to help employees throughout the company resolve their problems. They could use the portal to reset their own passwords, instead of having to ask IT for help. This can help you reduce labour costs at the IT service desk.
8. Renegotiating Contracts with Suppliers
Contracts with vendors and suppliers can always be negotiated. Don’t assume a signed contract means you can’t try to negotiate with your suppliers until the contract expires. The contracts will end at some point, and your suppliers are probably hoping you’ll renew when that happens. Suppliers know they have to keep you happy during the contract term if they want you to renew later. That means you have some leverage.
Call your suppliers and explain the reasons you need better pricing. In exchange for a contract extension or another incentive, your suppliers may be more than willing to give you a better price. Try to be flexible during negotiations to encourage your suppliers to want to help you.
9. Switching to Cheaper Suppliers
If your current suppliers can’t or won’t give you a better deal, their competitors may be able to help. Before the contracts expire, seek formal bids from other companies in the industry. You can then compare the bids and choose new suppliers that will give you better value for your money. For example, startup companies may be willing to provide lower prices than your current suppliers to grow their client lists.
You could also use the bids you collect to re-negotiate with your current suppliers. If suppliers weren’t willing to negotiate previously, seeing bids from competitors could encourage them to start.
10. Moving to the Cloud
On-premise services have several associated costs. You need to pay for software licenses, upgrade expenses, and server maintenance. There’s also power and cooling costs to worry about. You need to pay employees to look after these responsibilities.
Moving to the cloud can help you reduce these expenses and control costs. You just need to budget for a monthly fee for the services—not all the extra costs you’re paying now. When you use cloud-based services, you can stretch your IT budget further.
