8 Ways to Cut Enterprise IT Costs
April 13, 2023
Many enterprises have started cutting costs in an effort to adapt to a shifting economy. For example, Gartner reported last year that a significant number of Chief Financial Officers (CFOs) were planning to cut costs.
One popular area for budget cuts is IT spending. Why? Because IT costs can be expensive, especially given how much businesses rely on data and technology.
But this presents a dilemma: How do you lower IT costs without disrupting business operations?
Fortunately, there are ways to lower your IT costs and maintain a high level of productivity. It may require auditing your IT infrastructure to prioritize investments and leveraging better tech to improve your bottom line.
In this article, we’ll go over what IT cost reduction means for an enterprise, areas where you can reduce personnel IT costs, and areas where you can lower non-personnel IT costs.
Let’s get started!
What is IT cost reduction?
Put simply, IT cost reduction refers to optimizing IT processes and resources to reduce overhead costs. It’s all about identifying areas of potential underutilization and eliminating things that have low business value.
What does this look like? Streamlining existing IT infrastructure, outsourcing certain IT work, or leveraging software. Ultimately, the goal is to boost the company’s efficiency, productivity, and profitability.
Lower personnel IT costs
One of the biggest IT costs is staffing. Recruiting, hiring, onboarding, training, paying, and providing benefits to employees can get expensive fast.
Of course, you need some IT staff to run your operations. However, you may be overstaffed and not know it. This tends to happen as businesses grow. You accumulate more staff than is necessary to remain operational and efficient.
There are many ways to combat this, all of which involve embracing automation and establishing processes to keep your staff lean in the first place. That way, you can better avoid laying off a lot of people all at once.
Here are some concrete tips for reducing IT personnel costs:
1. Hire new IT college graduates
Though it’s natural to prefer IT job candidates with a lot of experience, hiring new college graduates can be a good way to lower staff costs by paying entry-level salaries.
To make up for the lack of experience, you can have your experienced staff train the new personnel and get them up to speed quickly. They may not be as productive fresh out of the gate, but with a little time and effort, they could be at the level you need them to be.
To streamline the recruiting process, build relationships with local schools and colleges that have IT programs.
2. Reduce IT staff turnover
IT staff turnover can be extremely costly. Every time you lose an employee, you must invest time and effort into hiring and onboarding someone new. So the lower your IT employee turnover rate is, the lower your recruiting costs will be.
One way to improve your turnover rate is to treat employees so well that they don’t want to leave. You can do this by expressing your appreciation for their hard work and recognizing a job well done. It doesn’t take much.
Another way to mitigate turnover costs is to replace outgoing staff with lower-level employees. That way, you can focus on hiring lower-level staff, who can be easier to find and demand less pay.
3. Outsource specific IT tasks
Your IT needs can fluctuate. So employing a full-time IT worker can be an expensive solution when IT needs are low. Even if there’s little to do, you still have to pay them.
In contrast, outsourcing specific IT tasks can be more cost-efficient because it allows you to pay for only the work done. Many IT vendors also offer flexible pricing models that allow you to opt out of their service anytime.
Just be careful that you’re not offsetting the savings of outsourcing IT with higher costs in travel or correcting lower-quality work. Vet your vendors carefully to ensure they deliver high-quality work.
4. Manage your IT vendors better
On a similar note, you can save money by managing your IT vendors well. This means tracking how much you are spending on contractors and only paying for services rendered, none that you don’t need.
Managing your IT vendors well also means not relying on them too much. If you over-rely on a third-party service, it’ll be harder to cut ties if they increase their pricing or fail to deliver the results you want.
Lower non-personnel IT costs
In addition to reducing personnel IT costs, you can reduce non-personnel IT costs. Here’s now:
5. Migrate to the cloud
Keeping business data stored on on-premise data centers can take up a lot of space. Instead, store it in the cloud. This allows you to be more efficient and only pay for the space you really need. The cost of renting cloud space is typically much less than owning physical real estate (not to mention buying expensive servers).
6. Virtualize servers by using containers
In the past, every application used a dedicated server. Many of these servers had low utilization rates, which made them expensive to own.
However, nowadays, you can partition servers to let them serve multiple applications at a time. Furthermore, through virtualization, you can swap physical hardware components for virtual ones (aka containers). By compartmentalizing low-functioning servers, you can make the most use of your data storage resources.
7. Reduce software licensing costs
Though IT software can be extremely useful, if you're not careful, it can also eat up your budget. So negotiate software licensing agreements to ensure you’re only paying for features that you actually use.
For example, you may be using expensive IT software for minor tasks. In that case, it may make more sense to find a simpler, more affordable solution and decommission any software that isn’t generating much ROI.
8. Use open-source software
Lastly, opt for open-source IT software where possible. It’s almost always free to use and you can access the source code to customize the software to your organization’s needs.
Plus, since open-source software is always being worked on, it tends to develop and evolve faster than some commercial counterparts that are supported by only one company.
The bottom line
Cutting IT costs without sacrificing operational efficiency can be tough. But if you take the time to explore cost-cutting IT strategies like the ones listed above, you’ll be able to find an ideal solution that benefits your enterprise in the long run.