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Don’t Make These 14 IT Cost-Cutting Mistakes

Besides, you risk losing some or all of your data to work hazards. When you make use of MSPs, you may be able to reduce your need to have adequately trained staff who can deal with proper maintenance or repairs. You pay a flat fee for the provision of a high level of service quality to your business.

IT cost reduction mistakes

This is a recurrent cost that can be handled through open-source software. Open source software comes free of cost, gives you access to the source code and you can seek help from the community to help your business. Virtualization treats a single server as several servers that can support multiple applications at a single instance. This will not only reduce hardware costs but also save up on energy usage. While the end-to-end indirect cost optimization of multiple functions and cost categories takes at least six months, not every organization needs to go that far.

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This allows developers to focus more on features than the way they are integrated and deployed. They don’t need to spend time on preparing pipeline configuration and can perform instead more higher-value tasks. As a result, your software development team becomes more efficient, and the cost of your software projects is minimized. Today, as COVID-19 rages on, business owners, CIOs, and CFOs need to have effective IT cost-saving strategies in place to ensure business continuity. It includes both short-term and long-term measures tailored to a different business scenario. Here at N-iX, we have been helping companies across the globe optimize and reduce their IT and operational costs since 2002.

IT cost reduction mistakes

Know the cost of your top applications, broken down across run versus dev, infrastructure, and projects. Use this information to strategically reduce investments in applications that provide low business value for the cost they incur. Every decision has implications, and some cuts you can live with and others you can’t. A common cost-cutting mistake is the theory that purchasing automation software will allow you to lay off your staff.


Defects introduced during the requirements and design phase are not only more probable but also are more severe and more difficult to remove. Front-end errors in requirements and design cannot be found and removed via testing, but instead need pre-test reviews and inspections. Table 1 shows the defects introduced during different phases of the software development life cycle. Successful digital transformation is always built on a proper strategic approach. You cannot start cutting costs randomly from each department without analysis. This also does not mean that you should make a general list of “fancy stuff” you’d like to use.

These attributes include complete and correct requirements and specifications as drawn from the desires of potential customers. Thus, defects cause software to fail to meet requirements and make customers unhappy. A strategy means working with the stakeholders of your company to determine which technology would solve the goals of the business. All decisions will impact not only a certain department but the whole enterprise in general.

  • Work with your finance partner to obtain a solid view of the expense-level detail, such as expense accounts, and key balance sheet accounts, including expense accruals and prepayments.
  • IT costs are comprised of two kinds of costs – operational and capital costs.
  • One way to save costs is to consider booking flights that will take you to a small, regional airport instead of a major airport hub.
  • And when a defect gets through during the development process, the earlier it is diagnosed, the easier and cheaper is the rectification of the defect.
  • For instance, you are able to save a database image, run a test cycle, fix errors and then come back to the original database so you can run the test again.

They cost less and can help you save money on your business trips. By developing a travel itinerary ahead of time, you can book in advance and avail of cheaper tickets. Small businesses often have high operating costs because their suppliers charge higher for their raw material requirements.

Another common mistake I would recommend avoiding is hiring outsource companies to reduce costs. Only 9% of organizations create enough capacity to take on the growth and innovation opportunities they pursue. Aggressive cost reductions can drain resources from high-impact innovation projects or indefinitely delay funding to a point where competitors can hurdle your organization in the market. In 2021, this is the major tendency and the key destination for many businesses. According to theState of Tech Spend Report, almost 50% of companies demonstrated increased willingness to move to the cloud. Moreover, 62% are planning to reduce their use of data centers in the next 24 months.

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The use of analytics can help HR see if a department’s spans of control are too big or if there are salary imbalances among employee groups. To create momentum, it helps to assess the value at stake early on. Benchmarks can help identify areas of improvement and assess the cost-saving potential quickly.

Small businesses with a limited budget frequently ignore the DevOps position and try to do everything on their own. However, if you’re not ready to hire a full-time in-house specialist, you can outsource this service. It’s undeniable that your people are your most valuable resource, but they also happen to be the largest expense, which can account for up to 70% of total business costs.

How to reduce IT infrastructure costs for my business?

Standardization is a common IT strategy that brings a cohesive approach to infrastructure management. By introducing policies and procedures that promote standardizing systems, many inefficiencies can be eliminated by removing expensive and unnecessary customization. Through their specialization in the field, cybersecurity providers can deliver robust security at a fraction of the costs it would take to safeguard the business with an in-house team. MSPs can also be invaluable partners in helping your business access to the most cost-effective technologies by leveraging their vendor relationships. Keeping technology costs as low as possible without compromising performance or scale is among the most important goals of your IT team. With this in mind, you can develop a clear view of which levers you can pull immediately and which will require more time.

IT cost reduction mistakes

Instead, we’re talking about a strategic approach to improving the functionality of your business by investing in systems designed to increase efficiencies and cut costs. But to build those systems, you need to invest in the right technology. Rather than waste time and resources reinventing solutions, review previous cost-cutting strategies and see if they’re still applicable. Before adding new functionality to an existing product, expanding your service line, or building out a new product, you need to consider the cost. A lot of organizations miss out on the cost-cutting benefits of combining purchases and services.

Monitor cost drivers

Outsourcing has been a very effective way to reduce spending on employees for some time now. For digitization services, many companies have adopted the strategy of outsourcing IT staff. This is a successful strategy as the project deliverables are the primary reason behind company costs. A full in-house strength means higher costs as sometimes the company might face a lower number of projects.

One useful approach may be to establish a solid relationship with local colleges and hire fresh graduates so as to discover new talent in a less expensive way. Also make use of interns, as it is one cost-effective method to handle departures and make sure your staff grow side by side with the company. One other way to reduce IT costs is to move some or all of your data and applications to the cloud. Managed Service Providers ensure that your uptime management and IT efficiency are increased. They let you outsource your IT tasks to a vendor and lighten your IT maintenance burden at a reasonable price, thus enabling you to focus on core business concerns instead of IT management tasks.

In fact, a lot of businesses focus on the wrong strategies to save pennies instead of making the right investments that will save them way more. However, be aware that it takes a special and specific type of person that is highly self-motivated to work remotely for sustained cost reduction strategies periods. Another guaranteed technique to decrease IT costs of your company is to allow your employees to work from home. Operating on-premise services incur lots of expenses, payments have to be made for software licences, server maintenance and the likes.

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Also, we will tell you how to use outsourcing for IT infrastructure cost reduction, things to optimize, and give you some useful tips on running or growing a business saving money. Demands for cost reductions may seem urgent, but pause long enough to identify what will deliver impact in the short term and what could damage the business in the longer term. 39% of CFOs polled in May said they would cut costs in 4Q22 if high inflation persisted. The ongoing threat of recession will only add pressure to reduce spending. Please comment below and let us know about the issues you’ve faced when cutting costs.

The hybrid cloud model is popular because it allows businesses to control what systems, tools, and data are publicly and privately accessible in the most cost-effective manner. They’re also highly scalable and make upgrading or adding functionality cost-efficient and simple. Virtualization allows businesses to maximize their use of server resources by increasing capacity by four times more than physical environments. Companies often move to virtual environments to reduce energy and hardware costs while increasing the flexibility of their IT environment. According to the recent Gartner survey, reducing workforce costs is the most difficult thing business leaders have to do in response to COVID-19. Many companies are left with no choice but to freeze hiring, delay or cancel new hire offers, freeze travel and entertainment (T&E), reduce salaries, eliminate 401 match, lay off employees, etc.

Believing that most costs are fixed also causes executives to focus cost reduction efforts only on the small percentage of costs perceived as variable, such as purchased services and supplies. It might seem that we live in a digital era and such mishaps in business processes are an exception. Add other distractions, such as working from home, and the risk grows.

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