Even the slightest economic downturn can lead to corporate challenges, so it’s always essential to identify areas of unnecessary spending and cut costs wherever possible. From an IT infrastructure perspective, doing this requires an organization to analyze their current IT expenditures with the objective of identifying areas for cost reduction. Optimizing your IT budget can be overwhelming at first, but doing so will save you money, improve efficiencies, and reduce risk.
Gain Visibility with an Audit
The first step in optimizing your IT budget is to gain a better understanding of how you currently use technology. This requires a level of organizational transparency that many companies lack. Without a clear picture of your IT usage, you won’t be able to identify where you can save money. Start by conducting an audit of current technology and systems and assessing how they’re being used. If you’re ever going to optimize your IT budget, you must first be able to see the big picture.
Address Unnecessary Complexity
While it’s tempting to outsource everything and build a “dream” technology stack, it’s rarely a cost-effective strategy. In today’s digital economy, you’re looking for scalability and flexibility—not excessive complexity. Unfortunately, many businesses have become victims of vendor lock-in, making it difficult to get out of expensive contracts if necessary. One example is Amazon Web Services (AWS), which is often over-considered for certain use cases. AWS is great for certain types of applications, but it might not be the best choice for other kinds of workloads.
Reduce Excessive Vendor Management Costs
While it’s important to manage your vendor relationships, it’s equally important to avoid excessive vendor management costs. Many companies try to do everything themselves, then outsource specific components. They then outsource the outsourced components, and so on. This complex web of outsourcing can be extremely expensive and will often result in excessive vendor management costs. If your company is managing its own IT operations internally, you’ll want to negotiate better rates with your vendors and suppliers. If you’re outsourcing, you’ll want to select vendors that provide value beyond just the price they charge.
Right Sizing Resources
Over-provisioning is one of the most common causes of unnecessary IT spending. It occurs when an organization purchases more capacity than they need. Over-provisioning is often driven by a desire to be prepared for future growth, a reactive approach based on past growth patterns that leads businesses to pay for resources they don’t need. A great example is Microsoft O365, whose notoriously complex pricing model leads many businesses to overbuy versus paying for what they actually use and need.
There are several ways to identify over-provisioning in your IT environment:
- Analyze your existing capacity. If you know how much capacity you’re currently using, you can identify where you’re over-provisioned. Examine your existing usage patterns and compare them to the capacity you have.
- Schedule regular capacity reviews. These will help you identify trends in your capacity usage and allow you to act and right size before you become over-provisioned.
- Use analytics. An essential tool for modern businesses, using analytics to identify trends in your capacity usage will also enable you to right size and avoid over-provisioning. You can also use it to identify opportunities to reduce your costs.
Plan Your IT Budget
Budgets are important in any organization, but many companies don’t have a clear budgeting process for their technology. Without clear budgeting processes, it’s difficult to plan and forecast spending. Poor budgeting often leads to over-spending and unnecessary expenses. The key to better budgeting is confidence in knowing what you have and what you’ve spent in the past. Without that, any budgeting is a shot in the dark.
Summing up
Optimizing your IT budget is essential for any organization looking to stay competitive in today’s digital economy. To do this, you’ll need to find ways to reduce your spending wherever possible. The key to doing this is to gain a better understanding of your current IT environment and find areas for cost reduction.
