How to Shrink IT Costs: 4 Crucial Strategies for Saving Money

December 3rd, 2018
How to Shrink IT Costs: 4 Crucial Strategies for Saving Money

While it’s no secret that running a business requires a hefty initial investment, many new business owners are shocked to find out the extent of where their money goes. According to a study done by AMR Research, 6.4% of the yearly income of the average small business is spent on their IT department.

IT expenses are, of course, always going to be a priority in order to manage a successful business. But that doesn’t mean there aren’t a few ways you can optimize your budget while still keeping the same or higher level of quality.

In the following article, we’ll break down the four best ways to cut costs in your IT department.

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#1 Data Center Automation (DCA)

When we talk about DCA, we’re referring to the strategy businesses apply in order to automate IT functions across physical and virtual networks. This allows us to cut down the time spent doing IT tasks manually, from scheduling and service configuration to system surveillance.

By using automation, the upkeep and resources surrounding actions like repairing and updating databases no longer requires paying a staff member to do so. The job gets done with little need for maintenance.

To get started implementing this strategy, it’s only a matter of finding and deploying a product that’s suitable for your business’ needs. Different services will offer you a different range of tools and functions that can be automated. In the long run, the cost difference will have undoubtedly improved.

#2 Standardization of Hardware & Software

A research study conducted by the American Society of Association Executives tells us that a business can spend $74,000 per year solely on hardware & software. We’re here to tell you that that number could be drastically cut with a few simple techniques of standardization.

What is standardization? We’re referring to the practice of implementing compatibility throughout the applications you use. In simple terms, you need to make sure that you’re making the most out of your hardware & software while keeping it consistent and simultaneously spending the least amount possible. Let’s take a look at how this can be done:

  • Decommission software licenses that aren’t worth the expensive cost. Many of these agreements offer nearly the same functions through a cheaper alternative.
  • Ensure that the majority of your staff is using the same type of operating system in order to reduce infrastructure expenses.
  • Use open source software to cut down on pricey startup costs and ongoing yearly fees.
  • Make sure that you’re working with updated and singular versions of your hardware and software.
  • Utilize containers to execute your programs on a smaller budget.

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#3 Virtualization & Cloud Computing

Virtualization allows you to minimize the physical components used by hosting them in a virtual environment instead. When combined with cloud computing, you’re successfully cutting back expensive infrastructure costs and cashing in on different benefits such as the security of a private, cloud-based storage system.

These two strategies are a godsend for reducing the amount of money you put into buying and maintaining physical equipment. You’re also minimizing labor, configuration and setup costs. This can be an especially useful saving tactic when it’s time to expand your storage capabilities.

If you’re not already implementing this strategy, we fully recommend switching to the cloud with as many IT services as possible. Throughout time, it’s not only cheaper, but safer and more efficient for securing and storing private data, which are key issues for tech business owners.

#4 In-House Staff & Outside Contractors

Lastly, we have to keep in mind that sometimes IT cost cutting doesn’t have to do with the equipment at all, but with the employees you hire and the practices you use to do so. Personnel costs account for 37% of the average annual business budget, according to IT analytics by Gartner.

Many businesses make the mistake of periodically letting employees go without having the sufficient means to replace them and maintain the same level of quality. Often, this causes the average small business to spend a hefty amount on training new employees every year.

There are a few different steps you can take as a business owner to reduce staff and service costs and make the most effective use of your budget. Firstly, we recommend outsourcing tasks and services on a regular basis. Outsourcing has been proven to lead to a reduction in overall IT costs, so it’s important to find the balance between having an in-house team and regular outside contractors.

As another approach, steps should be taken to reduce overall turnover at your workplace. Instead, combat the issue of expensive training costs by always replacing a leaving employee with one just below their level.

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With the combination of these four strategies, as well as the input of an experienced accountant who is educated on your business’ history, you’ll be set on the right path towards an optimized budget for your IT expenses.