How IT Departments Can Save Money on IT Costs

Life isn’t easy for the IT department. An often thankless job, IT departments are expected to keep operations running, with no interruptions, while simultaneously protecting data. IT departments are also expected to stay within budget while completing these tasks. So looking for ways to save money on IT costs becomes a high priority for any IT department looking to function at full capacity without overspending.

Luckily, there are ways to save money on IT costs without sacrificing function. Check out TechDecisions’ recent whitepaper, “11 Surefire Strategies for IT Managers to Save Money,” as a primer, and continue on to learn some more ways to save money on IT costs.

Optimize Costs

The first way to save money on IT costs is to make sure that you aren’t overspending for services you need. Every IT department needs to spend money, but like with any product, some deals will be better than others. It behooves IT leaders to run through their services and ensure that we’re not being wasteful with our expenditures.

There are many ways to optimize IT costs. Leveraging the right technology in the right places, sharing services, budgeting correctly, and ensuring end-user computing is streamlined will all cut the need for IT costs. These methods will lead to less bandwidth for services,  less maintenance and training time for the IT department, and less issues with overspending due to poor budgeting. Jim McGittigan, Research VP at Gartner, offers a list of ten optimization ideas in a recent article:

1. Create a shared-service organization for some or all IT services
2. Centralize, consolidate, modernize, integrate and standardize technologies
3. Leverage cloud services
4. Increase IT financial transparency to better manage both supply and demand
5. Utilize zero-based budgeting on the right cost categories
6. Rationalize and standardize applications before cost-saving initiatives
7. Optimize software licensing management and IT asset management capabilities
8. Improve procurement and sourcing capabilities
9. Invest in Mode 2 capabilities such as agile and DevOps
10. Re-examine how end-user computing is delivered

McGittin’s list gives a good starting point, but saving money on IT costs isn’t as simple as a ten-point list. Larger enterprises spend billions of dollars every year on IT costs. IT is such a complicated industry that hidden costs can be buried so deeply they aren’t easy to identify.  Where does an IT department start? What do they even look for?

Digital Fuel offers some great advice in a recent whitepaper. The best cost optimization comes in four areas – Waste, Duplication, Demand/Consumption, Old/Inactive.

Waste – Plenty of IT organizations have more than what is needed, they just don’t realize it. Common examples of wasteful areas are CPU, memory, VMware, storage, software licensing, and data center space. Take a look at your organization’s capacity management problems, and solve them in order to optimize spending in these areas.

Duplication – Why pay for two when one will do? Often, applications, collaboration systems, monitoring and operations tools, and vendor contacts and rates can appear in multiple places, when only less will do fine. When mergers and acquisitions occur, ensure you’re not bringing in added costs that your company is already paying for, and eliminate what you don’t need. Make sure you retire legacy tools when you upgrade to new platforms. Portfolio management can help reduce duplication by putting all of your costs in a central location to view. Dropping from multiple vendors to a single vendor can help ensure you’re not getting duplicate software or tools.

Demand/Consumption – It isn’t a free, unlimited resource, but customers and employees typically don’t understand that. Organizations often overconsume in public cloud services, VM provisioning, and keeping them on or not deleting them when they are obsolete, and employees not returning computing devices when they are finished with them. It’s a tough sell, but transferring IT’s budget to the business and having chargeback for services consumed helps alleviate the stress for IT, and makes the business pay more attention and force cutbacks the IT department couldn’t get approved.

Old/Inactive – When the cost to maintain a legacy system is no longer assuaged by the value of the system, it’s time to move on. That’s not the case for all IT departments, however. Applications, data, emails, and infrastructure will eventually become obsolete, and in the long run it’s cheaper to replace them than to keep them running. Lifecycle Management can help identify old and inactive systems and identify what steps to take to optimize costs.

Optimizing costs gives us the first step in saving money on IT costs. However, the most effective way to save money is to stop spending money.

Cutting Costs

According to Eaton, 56 percent of companies expect revenue to increase, but only 38 percent of companies expect their IT budget to increase. That means that more bandwidth will be needed with a similar budget. For these companies, cutting costs becomes a priority in order to maintain level of service without overspending.

Unneeded services like web hosting, surplus phone lines, or underutilized T1 lines can be cut. Underutilized servers that are eating energy costs give companies no benefits. Get rid of them. 90 percent of IT pros polled in the Eaton survey admitted they were wasting money on software they didn’t use. Odds are you’re doing the same. Check licenses and cut what you don’t need.

Help Desk costs can easily be cut through the use of self-service. 85 percent of the typical Help Desk budget goes toward staff handling calls that are frequently routine, such as lost passwords.

Hardware is an easy place to save money. Intelligent power management is a good way to cut costs. Monitoring connected equipment will save money by alerting you of expensive problems, and save you the time of checking on it yourself. Collocation of hardware offers backup and data recovery benefits, as well as cost-effective bulk rates. UPS systems can pay for themselves and then some. Downtime soaks up money – keep an eye on battery systems and replace them when necessary. Consider rack PDUs that measure energy at the outlet. This will help you save costs, especially in large data centers. Finally, shifting to thinner systems like tablets or laptop hybrids can trim the fat.

For example, one of the ways that IT leaders can save money is through desktop displays. It’s an area that almost every company must spend money in. However, traditional displays have hidden costs, especially in the case of power consumption, up to 20-40 watts per hour. Luckily, there are models that allow for less consumption. The California Energy Commission estimates that energy-efficient displays can save up to 2,332 gigawatt-hours per year, reducing utility bills across the state by $373 million annually once displays are replaced. You can learn more about how desktop display can save on IT costs in our recent whitepaper.

Believe it or not, employing new technology can save money. There may be an up-front cost that you’ll need to justify to upper management, but the justification comes in the form of reduced cost for maintenance, operation, training, and managed services. Accenture offers four waves to save money on IT costs in a recent whitepaper.

Minimize Spend – Exploit immediate cost-reduction opportunities and minimize ongoing expenditures. Prioritize project spending aggressively. Review license and procurement spending, reduce supplier costs through strategy, renegotiate service level agreements, consolidate vendors, reduce external headcount and staffing, and increase asset utilization.

Optimize for Efficiency – Achieve greater alignment through managing supply and demand, IT process automation and improving efficiency with the existing IT operating model. Virtualizing, consolidating, centralizing and standardizing servers, storage, databases, and apps, eliminate fragmentation, complexity, and waste through output-oriented managed services, increase use of the cloud, and introduce workplace collaboration and self-servicing tools.

Re-Architect to Future-Proof – Simplify the business architecture in order to handle the challenges of tomorrow. Areas to look at include mobile apps, cloud computing services, and support for personal devices. Review management of devices, software, third-party supply chain, and IT applications and infrastructure. This may even require a fundamental change to the It operating model.

Drive IT-enabled Business Value – Convergence of the business and IT enables flexibility to reduce sales, general and administrative costs, and helps to grow IT. Costs and services can be modified using automation, self0service, and improved management information to identify areas of inefficiency.

None of this advice is necessarily simple to implement. However, cutting costs while maintaining efficiency is never simple. These tips can be inserted into your routine work flow, and bit by bit you will see cost savings as you implement strategies. Our recent whitepaper, “11 Surefire Strategies for IT Managers to Save Money,” will also help you understand how to continue cutting costs, with a specific example of a strategy for cutting cost on hardware.

Before you know it your accounting department will be throwing you a parade for reducing costs and maintaining service level.

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