Don’t Waste A Good Crisis: 7 Ways to Cut IT Costs and Stay Ahead of the Game

Businesses in Los Angeles and the US have entered unchartered waters as the economic ripple from the COVID-19 pandemic continues to reverberate across the world.

Business owners are scrambling to find ways to cut costs to keep their businesses afloat.

Technology budgets tend to get bloated in normal times -- too many initiatives in progress, poor prioritization, and lack of focus on costs takes its toll.

But cost optimization becomes a must when the economy hits the breaks.

The good news is that you can do both -- cut your costs without loosing your competitive edge.

Let’s explore.

1. Review Accounts for Expendable Expenses

Before putting your IT budgets on the chopping block, business leaders must carefully assess their technology portfolio.

A clear view of all technology expenditures within your organization and within business units will make it easier for you to hone in on strategic wins.

Examine each expense individually to find things you can and cannot do without.

Make sure you have a holistic understanding of the value that each technology product and service has on your business and that you don’t make cuts blindly.

Review your expenditures with your CIO, an IT consultant or a Managed Service Provider to make sure that you follow best practices and your cost cutting does not have an unintended impact on your business.

My company Evolve! Technology Consulting is extending a complimentary IT cost review offer to qualified businesses during this pandemic as a service to our community.

You can apply for your free and confidential IT cost review consultation here.

2. Focus On Expenses That Have An Immediate Impact

Cutting your “pay as you go” operating expenses (OPEX) will provide immediate savings, while you can take a broad look at your overall technology strategy and budget.

Reducing your payroll, rent, cloud, internet, telephony expenses, recurring software license fees, insurance and non-critical research and development expenses can provide immediate cash flow relief.

Ask your vendors and service providers for promotional pricing or explore temporarily switching to lower service tiers to preserve your precious cash.

Most vendors would be willing work with you and accommodate your cost reduction initiative to keep you as a client.

3. Outsource IT Staff

This may not be the most popular measure politically, but with personnel costs making up the lion's share of IT budgets, this might have the most impact on your bottom line.

With an average IT administrator salary around $85,000 per year, outsourcing the support and management of your technology to a Managed IT Services Provider (MSP) can offer significant cost savings.

In a survey of 234 US-based MSPs, Kaseya found out that, on average, MSPs charge $64 per desktop and $216 per server for ongoing maintenance and support per month.

Thus, the monthly support and maintenance cost for a 20-person office with one server would be approximately $1,500 per month or $18,000 per year, savings of over $67,000 per year.

Due to MSPs’ ability to support and share their resources among multiple clients, they can pass on their efficiencies to you as significant cost savings.

Another advantage of MSPs is that they can often provide better-qualified, senior staff at a lower price point.

4. Consider Migrating to the Cloud

If you’re facing an imminent capital expense (CAPEX), such as a server, network equipment upgrade or a purchase of a new software license, consider replacing that CAPEX with an operating expense (OPEX) by procuring it as a cloud-based service instead.

For example, a mid-range Windows server for a typical small business will cost around $4,000 in hardware, $1,000 labor to configure and about a week to procure, provisioning a new Windows server on Microsoft Azure or Amazon AWS cloud data centers costs about $200 per month and take less than $200 and two hours to set up.

And according to Networkalliance.com, on average, firms spend $700 per user per month when all IT expenses are factored.

Whereas total ownership costs for cloud-based desktops is between $150-300 per month.

And cloud desktops can be provisioned or retired in minutes and significantly reduce complexity and risk associated with on-premise desktops.

Cloud computing also allows you to be a lot more agile and flexible and allow you to scale your resources (and costs) as your business needs change.

In addition to servers and desktops, other parts of your IT infrastructure can be purchased as a service and outsourced on a pay-per-use basis, which could provide significant cost savings for both your CAPEX and OPEX.

Such an operating model enables you to access advanced services without a steep up-front investment.

Security-as-a-Service, Disaster-Recovery-as-a-Service, Backup-as-a-Service, Artificial-Intelligence-as-a-Service are just some of the solutions that bring advanced IT technologies that may otherwise be out of reach at an affordable price point to give you a competitive edge.

5. Virtualize Your Servers

Virtualization enables the repurposing and decommissioning of some existing servers by allowing multiple virtual servers to run on a single machine.

According to the Uptime Institute, decommissioning a single rack server can annually save $500 in energy, $500 in operating system licenses, and $1,500 in hardware maintenance costs.

If your applications use dedicated physical servers that have low utilization rates, you can curtain your hardware and maintenance costs by consolidating your workloads with the help of server virtualization technology such as VMware and Microsoft Hyper-V.

6. Standardize Your Infrastructure

Standardization simply means ensuring consistency across your IT infrastructure - servers, workstations, networking equipment and applications.

Reducing complexity is an excellent way to reduce your ongoing support and maintenance costs.

Standardizing could be as simple as providing all staff with the same type of computer and operating system. This is one of the key actions that can reduce IT infrastructure costs and save money on training and support.

Looking at your legacy systems support and maintenance costs can also be a great way to reduce your expenses.

Review your current systems and processes and if needed engage an IT Consultancy or a Managed Service Provider to audit your systems and processes and come up with a standardization plan.

Standardizing and simplifying your IT infrastructure and management processes will increase efficiency, expand productivity and significantly reduce your total cost of ownership.

7. Work With Your Vendors

Take a closer look at what exactly your vendors and contractors are billing you for. List down your contractors, the amount you are paying them, and exactly for what services.

It may sound simple, but make sure that you actually need the services you are paying for. Don’t be shy about asking to defer or re-negotiate your payments as vendors would often be willing to work with you to keep your business, especially these days.

Don’t Waste A Good Crisis

You may be under pressure to reign in your costs to keep your business afloat as the economic fallout from the COVID crisis unfolds, but this can also be a great opportunity to strengthen yourself competitively and position for growth by being smart about cost-cutting.

Focus on culling expenses that have the most immediate impact on your cash reserves by reducing your payroll, rent and recurring software license costs, and then expand to longer-term costs such as your infrastructure and business processes that would also give you a competitive edge.

As Winston Churchill once said, “Don’t Let a Good Crisis Go to Waste.”