As I speak with business leaders these days, it’s clear the disruption of COVID-19 has left them looking at costs differently. The pandemic has forced them to focus on what their costs should be and create a more variable cost structure—a cost transformation, not simply cost reduction. Even a company focused on growth needs cost-efficiency to ensure capital is deployed to the right areas. This ‘dual focus’ means it is critical that leaders today have a more nuanced and precise view of cost reduction, as well as new tools and approaches to address the rise in complexity costs.
- Cost reduction creates both risks and opportunities, there is not a single universal right answer to pick from and to make the challenge harder time is already running out.
- Additionally, if the business turns around faster than management had expected, the company could find itself with a shortage of labor, placing the company at a competitive disadvantage in an improving business environment.
- This can reduce your overall software license costs for IT management tools.
- To achieve significant, sustainable savings a methodical approach is important.
- For instance, operational expenses are predictable expenses that occur during normal business operations.
- With that in mind, here are 10 strategies top CIOs can use to reduce their IT costs.
Another useful tool for companies to explore is the use of remote instant apps. These smaller software programs save significant time and effort and work by letting end users test functionality without requiring a full installation. That is using several different ready-made solutions and linking them together through the use of API/Cloud/RPA technologies so that you have a complete solution that meets all of your needs and requirements. For a detailed understanding of how we can help, check out one of our successful case studies on Enterprise software. Speaking of communities of enthusiastic users, these same users can deploy to shrink the costs of IT functions.
We Can Help You Establish Sound, Sustainable Cost
For example, cost savings in cloud services have a real cash impact, as opposed to reducing on-premises software licenses or owned assets like hardware. While the focus of many CIOs is and should be on bringing technological competitive advantages to the business, cutting unnecessary costs is always something to keep in mind. Here are six IT cost reduction strategies that allow IT departments to use more of the budget for new technologies that foster business growth. One issue that often arises with IT cost-cutting is the fact that not all cost savings are actual savings for the organization.
Some costs are necessary, so it’s important to classify costs into good costs, bad costs, and best costs. When embarking on cost cutting it’s important to have a cost cutting strategy that classifies costs as bad costs, good costs, and best costs. Independent Service Providersto streamline processes and achieve significant cost savings. Reshape your cost structure by attacking product, process, and organizational complexity. Complexity costs creep in slowly over time but must be taken out in chunks.
Making The Cut: Sustainable It Cost Reduction In A Pandemic Era
(Obviously, you should start with the least valuable ones.) While final decisions will require the input of other departments, you can draw up a list of possibilities. Determine which programs involve an unusual amount of work to support a portion of the company that is unprofitable or less profitable than the company average. Many departments conduct similar activities or purchase the same items independently, on a small scale. For example, departments often buy supplies without regard to what others are ordering. This prevents the organization from using its combined purchasing power to reduce prices. At one company, a department ordered the very supplies and equipment that others had in excess. Fruitful areas to examine include paper, photocopying, personal computers , and furniture.
Employing contractors instead of permanent employees can be cost-efficient in some cases since contractors are often employed for short periods of time or for specific projects. However, if these costs are not monitored, companies can overshoot their budgets in this area. Set lead time alerts on contract renewals so that your team has time to consider alternatives before the contract renews.
Six Big Strategies
At Capgemini Invent, we’re leveraging our extensive client experience in IT cost reduction to pioneer a sustainable cost optimization offer that tackles the many cost challenges. Using an agile methodology, combined with an innovative accelerator, our new offer allows you to collaboratively design your optimization journey, track financials, and secure real savings. Our accelerator provides unique mapping of IT cost levers and powerful solutions to make a potential impact on your baseline. We’ve compiled a list of seven IT cost optimization strategies CIOs can apply to any framework to help reduce costs within their organizations while still enabling business operations. 7 IT cost optimization strategies for CIOs We’ve compiled a list of seven IT cost optimization strategies CIOs can apply to any framework to help reduce costs within their organizations while still enabling business operations. PhoenixNAP and other service providers can deliver networking, storage, computing, telecommunications, and other IT functions.
Traditional cost reductions programs have typically followed either a top-down or bottom-up approach, fighting symptoms instead of the causes of high spending. Both classic approaches provide limited results and are not sustainable. Top-down, cost killing reduction programs that focus on one-off cost reductions can easily bounce back as there is no real structural change. Canceling cost reduction strategies business or putting projects on hold is not only unsustainable but can go against a company’s digital transformation ambition, leading again to an eventual rise in costs. Expense reduction services and cost reduction consultants have been extremely busy over the last year as organizations scrambled to overcome pandemic-related barriers and an overall downturn in the economy.
Our experience shows that administrative cost-reduction opportunities follow similar patterns virtually everywhere. The lessons we’ve gleaned may not solve your entire problem, but they should give you a substantial jump on it. Gartner recommends taking a structured and programmatic approach to cost optimization. Research shows that organizations that continue to invest strategically in tough times are more likely to emerge as leaders.
Enterprise It Tip #5: Streamline Costs With Managed Services For Cost Reduction
The gap between the analysts/industry forecasts and management’s EPS goals can be converted to cost-reduction and revenues requirements and highlight the need to further reduce costs. Nhu Le is a manager at Strategy& with over 10 years of advisory experience across Australia, Hong Kong, Japan and Malaysia markets. She has extensive experience in designing and leading digital transformation programs. IT should move beyond being a simple service provider and order taker required to seek efficiencies. Cost reduction exercises should be a joint effort between the CIO/IT executives and the CFO and Business Executives.
According to Computer Weekly, 56% of enterprise IT decision-makers surveyed felt pressured to adopt a supplier’s cloud strategy. There is a need to rethink these transactional associations as partnerships. If a vendor doesn’t allow for this type of relationship, and you have to remain with the vendor because they offer the best product to meet your needs, consider using a software asset management tool for cost reduction. In 2017, at an ITAM Review conference, Jochen Hagenlocher of Novartis stated that “90% of audits can be avoided through smart contracting, relationship management or if you purchase early. Policy-based automation of IT processes relieves IT teams from manual effort, thereby reducing operational costs and freeing up time for more strategic tasks. Download our IT budgeting checklist – 7 Processes to Automate to Improve Productivity and Reduce IT Costs, to identify which IT areas you can automate. It wasn’t too long ago that every application used a dedicated server and this multiplied due to DR servers, test servers, etc.
Let Growth Determine How You Cut Costs
Redesign or reorganization ideas often eliminate the lowest-value activities, with moderate impact on other departments, and can help cut expenses by up to 20%. Cross-department and program-elimination ideas are usually necessary when you’re aiming for 30% or more, but they have the greatest potential to be organizationally disruptive. Discretionary spending, such as for new projects, additional capability or services, is often a seemingly easier place to cut. However, even nondiscretionary “run the business” expenses such as IT infrastructure and operations can be cut by reducing usage or service levels.
is comet actually better than greatbow now because greatbow was legitimately quite good before and it got a very significant fp cost reduction
— dance of puff and bird (@vanilladragn) March 17, 2022
The average cost of downtime is over $7000 per minute for the average-sized company. Not only does doing things according to best practices prevent downtime, but it also minimizes tech debt, giving developers time back to focus on money-saving and revenue-producing projects. “Do things right the first time” sounds like a simple concept, but it’s really an idea that has to permeate the culture of your organization to be truly effective.
It maymake sense to outsourcecontract staffing recruitment to save time and money. When a new project approaches, a technical recruitment company can quickly find contractors for you. The cost reduction targets you’ve been given may seem impossible to meet. The good news is there are many strategies you can use to cut costs without harming the IT department or the overall company. Which strategies you choose to use will vary depending on the situation at your company and your goals. With that in mind, here are 10 strategies top CIOs can use to reduce their IT costs. DevOps and Agile practices generally break down organizational silos between software developers and IT operations personnel.
Alternatively, look at other solutions that might integrate more closely with products and services that are being used. It is essential in this respect that you review your contracts carefully as you want to minimize any penalties or fees that you might need to pay for early termination. CIOs may not realize it’s possible to save millions of dollars this way and not just internally. Some companies have switched to a user-support model for their own products and services, thus enabling them to shut down expensive contact centers.
Strategy #4: Implementing Devops And Agile Practices
To achieve significant, sustainable savings a methodical approach is important. The proven seven-step approach described below showcases the importance of the right steps in the right order to make the biggest impact. The outsourcing arrangement during the build stage often gets further complicated with multiple vendors and subcontractors. Used prevalently in multi-staged waterfall-style project management methodology, the subcontracting approach emphasizes scope and cost control, at the expense of agility and adaptability. Take these four actions to help prepare your workforce for hypergrowth March 18, 2022 Yaarit Silverstone from Accenture offers four tips for success with the crucial process for acquiring companies to integrate new employees. Cutting benefits and staffing costs can lead to employee frustration and dissatisfaction. Furthermore, hiring the cheapest employee may not lead to the best possible results for that position, ultimately leading to reduced quality and customer satisfaction.
Grounded in 27+ years of research and project work, and it incorporates the systems thinking mindset of Dr. W. Edwards Deming through education, proven tools, and mentoring. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Janet Berry-Johnson is a CPA with 10 years of experience in public accounting and writes about income taxes and small Software quality business accounting. This free ebook outlines the 5 most important pieces to unlocking the full potential of an integrated facilities management program. As part of our priority to shape a sustainable future, we are proud to partner with 30+… Now, as the lockdowns gradually ease, companies are facing heightened cost pressure, leading to questions about how to respond to the new normal.