Such a shift could help you considerably reduce costs and get qualitative work for a comparatively low hourly rate. Again, cost reduction does not have to turn into making a bargain at any cost. Before cutting the expenses, evaluate all risks, your main businesses’ main benefits, and sales channels. So when trying to reduce IT costs, make sure that you are not “cutting” off your added value by cutting costs. In other words, cost reductions answer the question – how to produce a product item for smaller costs? But before we look at particular ways of IT cost reduction, I want to highlight three points for your consideration. If you are hunting for savings of 30% or more, you may have to challenge even the most sacred of cows—and you may be pleasantly surprised at the outcome.
Many staff functions involve reviewing and reconciling information supplied from a decentralized field operation. Usually, these positions hark back to a time when there were many errors in the data or wide variances from expectations. Even as errors decrease and expectations are more routinely met, most companies continue to devote resources to checking 100% of the data 100% of the time. Consider eliminating the review entirely, conducting it less frequently, or checking just those units with a history of supplying bad data. One fast-food client required daily reconciliations of the cash balances of every one of its 600 stores, even though 99% of them had not had an error in more than a year.
When You’ve Got to Cut Costs—Now
Do you prepare long reports with comprehensive data when only exceptions matter or when the true consequences of variances are quite small? Do you prepare reports that cover short periods of time or are delivered in real time, when longer periods or slower reporting would meet the need just as well? What was worse, a senior executive’s assistant recognized that the reports were no longer useful, so she had stopped giving them to her boss.
- “Do things right the first time” sounds like a simple concept, but it’s really an idea that has to permeate the culture of your organization to be truly effective.
- At the same time, reducing IT costs is a top priority for nearly 40 percent of IT Leaders worldwide, especially since they are dealing with an economic downturn and new budget constraints.
- If you are running your business on a physical server, your excessive expenses might be.
- Get insight into the right steps to take for migrating workloads to the cloud and reducing costs as a result.
- Show how their consumption drives IT spend, so they can change behavior to reduce bottom line costs.
The company discovered that once a week was more than sufficient to catch errors before they did any harm. Take a look at where you spend resources on the off chance that certain events might arise. If you’ve answered yes to either question, you’re probably wasting those resources. We recently discovered an opportunity to reduce a company’s IT costs by more than $300,000 in the first year, and up to $500,000 a year by the fifth year, simply by changing its data storage policies to better fit its needs.
Strategy #4: Implementing DevOps and Agile practices
An insurer fell into this trap when it gave its IT shared-services budget an across-the-board 10% cut without adjusting demand for technology. Senior leaders didn’t have visibility into how that led to a slowdown of its cloud strategy and to accumulation of technical debt. Cost transformation is no longer an event or a limited program of several months.
What is the key to become successful business?
Understand the risks and rewards
One of the top business keys to success is taking calculated risks. Risks are part and parcel of running a business. They can help you make the right decision and become a better entrepreneur who can take their business to the next level.
And since she had no knowledge of the effort required to create them, she had not notified the reports’ originators. These positions were established on the assumption that two or more groups cannot understand each other’s functions well enough to communicate efficiently.
Take overdue personnel actions.
By redesigning its claim forms and eliminating exceptions that did not matter, the client saved more than half the cost of exceptions. Download the poster for key questions you should be asking to eliminate sources of waste, underutilization, or low business value within your IT budget. Apply the market forces of pricing and billing to encourage business units to right-size their consumption of IT services and resources. Identify and correct inaccurate applications of IT financial management principles, such as misaligned depreciation and amortization schedules or excessive budget padding. Comprising 30-35% of all IT spend, the application portfolio is an obvious target.
According to Computer Weekly, 56% of enterprise IT decision-makers surveyed felt pressured to adopt a supplier’s cloud strategy. There is a need to rethink these transactional associations as partnerships. If a vendor doesn’t allow for this type of relationship, and you have to remain with the vendor because they offer the best product to meet your needs, consider using a software asset management tool for cost reduction. In 2017, at an ITAM Review conference, Jochen Hagenlocher of Novartis stated that “90% of audits can be avoided through smart contracting, relationship management or if you purchase early. Policy-based automation of IT processes relieves IT teams from manual effort, thereby reducing operational costs and freeing up time for more strategic tasks. Download our IT budgeting checklist – 7 Processes to Automate to Improve Productivity and Reduce IT Costs, to identify which IT areas you can automate. A final thought on your journey to reduce IT costs is to make the CFO your friend.
Drive accountability across teams with a centralized view into your entire vendor portfolio. BMC works with 86% of the Forbes Global 50 and customers and partners around the world to create their future. DevOps and Agile practices generally break down organizational silos between software developers and IT operations personnel. DevOps and Agile are collaborative practices, focusing on faster time-to-market, lower failure rates, rapid updates and fixes, and quicker recovery from system issues. They pave the way towards an application-centric infrastructure that is built around improving application and service delivery rather than managing servers, switches, firewalls, and telecommunications lines.
- While it may be simple to stick with one vendor across the board, companies often pay premium prices to do it.
- CFO’s love saving money and they can be supportive in the cost-cutting process.
- Track how much infrastructure cost goes to supporting applications so that you can right-size infrastructure in alignment with shifting application plans.
- According to RightScale, 39% of instance spend is on VMs that are running at under 40% of CPU and memory utilization.
- Unless payments can be recovered or prepayments returned, the most immediate impact will be on unspent or uncommitted payments.
Microservices architecture deploys applications as a series of small and independent modular services that run unique processes and communicate through lightweight protocols, making applications easier to understand, develop, and test. In addition to identifying the inverse relationship between M&M costs and competitiveness, the survey also identified these six common strategies being used by survey respondents for reducing M&M costs. You cannot always be ready financially, logistically, or sometimes you can be short of time to build the product of your dreams.