Cost-cutting is rarely someone’s favorite subject, especially these days when IT leaders are continually being asked to find more places to unlock spend. As organizations face ongoing business disruptions from COVID-19, IT executives will need to shift perspectives and strategies quickly to ensure that they are taking the right action, both for their organization and the business.
According to the latest Gartner prediction, IT spending is expected to decline by 8% in 2020. From devices and data centers to services and systems, all areas within IT should anticipate (and prepare for) a decline in spending.
As a savvy IT leader, you know that the actions you take right now to streamline and save can have a lasting impact on your organization and your enterprise as a whole. That is the good news. Even though you have likely been asked to “go to the well” again and again to look for areas to reduce spend, it’s likely there may still be misspending within your organization.
7 Cost-Cutting Tips for Post-COVID IT Cost Reduction
The following tips are designed to help you look closer and dig deeper, so you can satisfy the needs of your business to save—all while providing stellar service.
1. Look beyond the easy cuts
IT budgets were already constrained before COVID-19, and now IT leaders have been asked to cut, and cut, and cut again, sometimes on a monthly basis. Companies have been in survival mode, and although it is getting a bit better, the pressure continues, and cuts are getting more difficult.
To find savings now, you need to investigate harder areas. You will need to get creative, look at things differently, and examine areas you may have looked at in the past. Many IT organizations claim to overspend on cloud. In the pre-COVID world, a small overspend on public cloud may have been acceptable. But in the new reality, shaving off an extra few percent can mean big savings over time.
2. Keep targeting savings in smaller slices
The low-hanging fruit is undoubtedly already gone. The unfortunate truth is you now have to dig deeper and accept smaller payoffs. But don’t give up hope—odds are you can still find plenty of ways to unlock some Benjamins to give back to the business, or to pay for initiatives that otherwise could not be funded. And these smaller payoffs can still add up to noteworthy amounts.
3. Consider on-demand spending, or public cloud
As you know, many technologies are available on-demand in the public cloud. And, according to Gartner, public cloud spending is the one bright spot in the otherwise dismal outlook. Access is as easy as turning on a light switch. There are powerful benefits to relying on public cloud services during and after the pandemic. Not only can you scale your costs, but you can also invest less up front, and avoid paying for on-premises data center space, capacity, licensing, etc.
However, it’s important to monitor that you don’t start paying too quickly. Imagine dozens, hundreds or even thousands of developers or automated processes accessing your on-demand technology without sufficient control. Rigor in governance was important before the pandemic; now it is crucial.
Easy access has implications in the form of waste, leakage and excess spend. You have an opportunity to optimize in these areas if you look for them. You will want to trust and verify your cloud usage. Ensure that rules are in place to look at your data on a regular basis—monthly or quarterly is recommended. You may even want to make it somebody’s responsibility or full-time job to watch this spending. Of course, you should keep in mind that there is a delicate balance between enabling the creativity of your most brilliant coders and keeping costs from running amok. Your diligence and discernment can make a big difference to your bottom line.
4. Realize that people may not want to admit they’re overspending
You can almost always find places to throttle back spending, if only you have the time. During a pandemic, when many companies find themselves with fewer hands anyway, time is at a premium. Yet the pressure is on.
Occasionally, groups under top leadership who didn’t identify places to cut initially don’t want to admit it in later cost-cutting phases. Develop governance models to track this on an ongoing basis, even during challenging times. Ask the hard questions and leave no stone unturned.
Ask the hard questions and leave no stone unturned.
5. Don’t be afraid to say that you may have missed something
There’s no harm in taking a closer look. One area to consider is toll rates. Decreasing WAN costs and renegotiating contracts can mean big savings. Often clients tell us that they did this already; they took out 30% only a year ago. We have seen over and over, however, that when IT professionals drill down again, they might find something they have missed.
Even though you may have checked that box in the past, commonly things get hidden or missed, and odds are, the savings are not inconsequential.
6. Do a light version of a cost savings program to determine if you need it
Before you invite one of the Big 4 into your IT environment with big plans for changes, you may want to consider engaging with a smaller organization to do a lightweight version of the project to ensure you have something “there.”
Once you determine there are savings to be had, you can decide to do the work yourself, continue to partner with that smaller organization to help you strategize your way to savings, or engage with a major consulting firm to help you get it done.
7. Use this unique situation as a reason to strengthen the partnership between your IT organization and finance/procurement
How well do you extend the olive branch to your partners in procurement or finance, or vice versa? No matter where your relationship stands, the partnership between your groups can probably be strengthened. Now is the time to go above and beyond. Your communication during this time is critical to finding areas lost in the cross-communication.
In some organizations, these two groups don’t even talk to each other. IT can perceive procurement as slowing things down. And procurement wishes IT understood more about budgeting. During this time when everyone is already pushed to the limits, set up appropriate and repeatable discussions between your two groups. When there are reasonable checkpoints, no one will be surprised. When procurement is off working on a big negotiation with a key vendor, IT will be in the loop. When IT needs a firewall, procurement will know.
When these groups open the lines of communication, there is even greater potential for optimization.
Optimize costs and increase your agility
If good IT cost-saving ideas and practices emerge during these challenging times, be sure to make them repeatable and sustained. The ability to shift your strategies swiftly in the post-pandemic world can mean lasting success for your business.