In the race to drive digital transformation in an accelerated manner, many companies fall into the trick of mounting their IT spend, yet not leveraging existing (or upcoming) investments to their whole potential. While it is beneficial to put money into modern technologies, tools, and systems to keep pace with permanent change, what’s more, important is for organizations to enable IT cost optimization to enhance business outcomes, workforce productivity as well as the overall ROI from IT investments.
What’s the significance here to optimize IT cost?
Cost Optimization is the continuing process to get the best pricing/cost with no impact or reduction in the scope of service delivery and ensuring the customer’s satisfaction record is maintained.
IT cost optimization can set a tradition of effective cost management – throughout the enterprise. Companies can streamline their cash flows, improve performance and generate big efficiencies across production, inventory, and supply chain processes.
Regular cost improvement measures can also help to make an adaptable and agile organization while smoothing out daily cycles to cut expenses and free up assets.
Regular challenges with IT optimization
When business performance becomes poor because of economic slowdown, competitive pressures, or marketplace changes – cost-cutting orders get passed down from executives to CTOs. Because of this, most of the companies consider a reactive approach to IT cost optimization and when it’s finally time to cut costs, they come across various difficulties and roadblocks. Here are some common issues that come with IT cost optimization:
– No transparency
Companies that think about IT cost optimization as a one-time investment do so mainly because most IT-related expenses are not transparent. Just a small bunch of C-suite managers have knowledge of how much has been invested, what tools have been implemented, and what has been planned for the future. In absence of transparency, it is difficult for IT teams to bring efforts towards IT cost optimization.
– Lack of an industry benchmark
With no insight into what costs are being accrued or how competitors are investing in IT, organizations have no way of benchmarking their costs – internally or against competitors. This makes it difficult for managers to locate cost centers throughout the company and assess cuts that will yield the maximum impact.
– No one to lead
Many organizations also lack a single resource (or team of resources) that can lead the cost optimization initiative. Because most managers are not trained or wired for an organization-wide activity like this, they do not know where to begin. In the absence of champions, they are forced to take drastic cost-reduction measures – without really having a robust plan in place.
Explain what areas to assess when looking to optimize IT
When organizations are faced with the challenge of immediate cost savings, they try to cut corners, without realizing that IT cost optimization does not mean IT cost reduction. Rather than getting negatively impacted by the consequences (and risks) of sudden cutting measures or seeing benefits that are of limited value, organizations need to begin the IT cost optimization process with an end-to-end assessment.
- Build a cost savings road map to identify short- and long-term savings from IT resources and transform cost-savings opportunities into reality.
- Embark on the journey keeping in mind the health of the business; revamp, refurbish or retire systems or applications that no longer offer any value.
- Focus on costs that can truly be reduced or completely eliminated – and not just postponed for the time being for they will spring back again in the future.
- Look for areas of your business where there can be a real impact in terms of costs. Will suspending an enterprise license streamline costs? Is shutting down a single data center improve the bottom line? Will moving to the cloud provide real cash savings?
- Assess your IT CAPEX and OPEX numbers and evaluate where you can really optimize costs – to see immediate and sustained reductions; also assess fixed and variable costs to minimize costs further.
How to optimize IT costs
IT cost optimization initiatives offer a wide range of benefits – not just in terms of reduced expenses but also in terms of accompanying complexity and risk. A well-planned approach towards IT cost optimization is what will help organizations drive maximum value. The options for cost optimization are many: from eliminating waste and duplication, implementing best practices, and embracing modern technology were effective. Here are 5 strategies/tactics to keep in mind when assessing IT costs:
– Modernize legacy systems
Legacy systems are one of the biggest reasons for massive IT bills. Because they consume a lot of resources and are difficult to maintain, they drain organizations of their costs. Modernizing legacy systems and eliminating them if necessary is the best way to begin your IT cost optimization activity.
– Understand user pain-points
A lot of organizations use systems and applications that have been passed down from ages (or from a recent merger). But are all these systems providing value to your organization? Do users need these systems, and if they do, are they able to use them to the maximum potential? Understanding user pain-points and re-architecting or retiring apps that offer low to medium value is also a good way to optimize costs.
– Assess the need for new tech
Embracing modern technology like AI and IoT might seem a very lucrative business proposition, but does your organization really need these advanced tools? Before investing in any new tech or system, carry out a thorough needs assessment and follow it up with a cost-benefit analysis to truly understand how much you stand to benefit.
– Embrace cloud
One of the best ways to drastically bring down your CAPEX numbers is by embracing the cloud. Since the cloud requires you to only pay for what you use, you can save up massively on data center costs including area, electricity, maintenance, support, and more. However, when moving to the cloud make sure you provision only the resources you need – or else you might end up with the problem of cloud overspend.
– Make optimization an ongoing activity
Lastly, be proactive about the IT cost optimization activity; don’t approach it as a one-time activity, but as something, you need to do on a continuous basis. Regularly examine the market and competitive trends to understand what others are doing to drive optimization.
Drive continuous value
In a world where organizations are struggling with pressures from clients and competitors alike, embracing an IT cost optimization initiative is a good way to enable top-line growth. When done as an ongoing activity, IT cost optimization can not only identify systems and assets that are no longer worth the money but also help in eliminating low-value tools and processes. Empowering business leaders to consider optimization as a business priority and giving them the guidance (and resources) they need is can help in laying the groundwork for breakthrough cost reductions – the kind that is sustainable, self-reinforcing, and value-driving.