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8 Critical IT Cost Reduction Strategies

IT Cost Reduction Strategies

How to Plug the Spending Holes in Your IT Budget

IT cost reduction involves analyzing how your organization uses and maintains technology while looking for ways to reduce expenses. Effective IT cost reduction eliminates waste, giving your team more time and resources to invest in better systems that drive business growth.

It’s not a myopic process that focuses purely on eliminating excess. Instead, you need to rethink how your IT department functions. The key to successfully reducing IT costs rests in your ability to redesign your workflows, systems, and policies. 

The Real Reason Why IT Cost Reduction Fails

According to Gartner, cost reduction strategies fail nearly half the time(43%). Why? Because they lack a clear plan in place that’s backed by leadership. 

Without a clearly defined strategy (playbook) in place, it’s harder for your team to stick to the plan. And without leadership behind the strategy, change management will be a real challenge, and your efforts will be short-lived.

To successfully reduce your IT costs, you need to build a plan around these 8 IT cost reduction strategies.

1. Hire Remote Workers and Freelancers

There are many IT cost-saving benefits to hiring remote workers. There are obvious benefits, like saving on office space. If you hire freelancers, you’ll pay a higher rate but usually save on benefits. And remote workers tend to be happier and more productive than office workers. 

However, one unique benefit is that you can save on wages by hiring remote workers in smaller cities and rural areas. This is because the cost of living (rent, expenses, etc.) is much lower in these areas than in big cities like New York or San Francisco. 

2. Promote Productivity Over Hours Worked

Working long hours is not the same as being more productive. A Stanford study found that productivity sharply declines if you work more than 50 hours a week. 

People need time off. Give it to them. Instead of pushing your developers to work longer hours, encourage time management techniques that make them more efficient. Set up a culture that rewards those who knock out tasks faster, not those who burn the candle from both ends. 

3. Reduce Maverick Spend

Maverick Spend (unapproved spend) is common throughout all organizations. And it can add up quickly. An extra app purchased here or there multiplied by employees across the whole organization can get out of hand quickly. 

Most maverick spending is done out of perceived necessity. Employees feel pressured to perform, and the existing systems and apps in place do not meet their growing needs. Feeling the pressure to perform, they find solutions that help improve their efficiency. 

This creates a lot of problems. For one, there’s the potential risk (and costs involved) with using unapproved platforms. Another is that one-off purchases usually aren’t vetted, meaning that these solutions could be more expensive than approved alternatives. 

One solution is to put better spending management in place. With clear processes for onboarding new software and penalties for non-compliance, you tighten up your tail spend. 

But, there are better ways to reduce maverick spending, like building the applications your team needs. Thankfully, there are ways to do that within budget. Specifically, you can use low code.

4. Use Low Code to Transform Systems and Processes

Data silos fragment your data and give your staff more manual tasks (like data entry). The result is an unclear view of your business and employees who are too busy with menial tasks to focus on strategic initiatives.

At the same time, inefficient processes riddled with bottlenecks eat up your IT budget as well. In fact, McKinsey pointed out that roughly 33% of the activities can be automated in most jobs. 

The solution is to bridge gaps between systems with integrations and automate processes. But doing this from scratch can be extremely expensive. And in some cases, the ROI is minimal at best. 

A better alternative is to leverage low-code or no-code platforms. These platforms use visual interfaces that allow users to easily build the solutions they need. It’s as simple as drag, drop, and going live. As a SaaS platform, you’ll only pay for what you use and the cost scale with your business. This keeps your IT spending low.

5. Ditch The Legacy Systems

Technical debt will obliterate your IT budget. On average, a company spends $3.61 per line of code maintaining legacy applications. When apps have 100,000+ lines of code, you can see that those costs add up quickly.

The challenge with leaving your legacy system is that your organization is heavily invested in it. They’re often focused on maximizing the ROI before building a new system. However, as part of an IT cost reducing strategy, it’s worth analyzing the cost of maintaining legacy systems against building newer, leaner systems. 

Look into cloud-based platforms over on-premise solutions. You reduce operating and maintenance costs while potentially increasing your security. Plus, if you need to expand services, it’s much easier (your provider handles everything.)

6. Leverage Robotic Process Automation (RPA)

Robotic process automation (RPA) uses bots to carry out rule-based, highly repetitive tasks. They’re ROI-heavy (around 30% – 200%). And they’re capable of processing tasks you didn’t think could be automated: analyzing text, reading unstructured data, even engaging with customers.

With RPA, you can collapse your back office and reduce the need to outsource work to offshore contractors. This can result in instant cost savings. The efficiency RPA brings to processing tasks means you’ll reduce the risk of errors alongside costs, too. 

7. Reduce Meetings

Most meetings could have been an email. It’s true. Sadly, many organizations still over-rely on meetings, and many of them are meaningless. Save time and keep your team energized by limiting meetings. Meetings should be short, only involve critical team members, and focus on working through challenges.

8. Reduce Employee Churn

Replacing employees is expensive. The hiring process, training them, and getting them up to speed takes a lot of time and resources. Reducing employee churn is easier said than done but doing so is an excellent IT cost reduction strategy.

Employees often leave organizations because they feel overworked, underpaid, and stressed. Burnout is a common factor. The solution is to reduce the likelihood of that happening. 

IT Cost Reduction – Final Thoughts

Luckily, everything covered on this list of IT cost reduction strategies so far is designed to reduce the strain on your IT department. With more resources and time, your staff can focus on growth initiatives to drive future business success. 

This creates a positive work environment where employees thrive and stay with your organization longer. In the end, everyone wins.

Human resources technology for operational efficiency
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Jason Skidmore

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