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5 Ways You Can Reduce Your Information Technology Costs

Information Technology Costs

Information Technology Costs

In 2021 the U.S spent $1.94 Trillion on IT products, services and staff.

It’s clear that our growing reliance on technology is becoming a runaway dependency, nay a necessity. But since IT (for most businesses) is a typically high expenditure, it makes sense that businesses are often looking for ways to reduce their information technology costs.

But how does a business optimize the ongoing cost of their technology without sacrificing the capabilities or reliability of their IT infrastructure?

In this blog, we’ll look at the 5 biggest, most effective ways businesses can successfully reduce their ongoing information technology costs.


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5 Ways Businesses Optimize Their Information Technology Costs

How to Reduce IT Costs 

Primary factors for IT costs management:

  1. What kind of IT Operation is currently in place?  Usually, there are three kinds:
    1. In-house
    2. Managed Service
    3. Co-Managed IT
      • Co-Managed IT is a hybrid of in-house and outsourced IT services.

Each type of IT Operation has different ways of measuring and managing costs.

2. Common ways to measure IT Costs

    1. Per-user:  Are costs per user going up or down
    2. Growth:  Is current IT hiring commensurate with new employee hiring?
    3. Small or Large Company?  Smaller companies may spend up to 10% of their company revenue on total IT costs in 2023; large firms closer to 5%
    4. Opex or Capex:  Opex is the more important measure.  If new large investments are planned, they should be amortized over their useful time value.
    5. Relative to Company Revenue: What are 2021 IT expenses relative to company revenue?
    6. Relative to Industry: In many industries, IT investment, relative to company revenues, is increasing. Among the leading contributors to this would be increased productivity and efficiency as more and more work is being done remotely, helping to drive cost reductions.
    7. IT Investment Leads to Other Cost Reductions:  Many processes can be automated, thereby reducing staffing. Many other processes can be outsourced (payroll/legal/accounting). These efficiencies are made possible by computer hosting/networking/security, etc. New technology (software/services) provides many businesses with a critical competitive edge.
      • Another example is acquisitions, integrating the systems of two companies to eliminate redundancies. IT makes these efficiencies possible. In these cases, increased costs are not really IT costs, but opportunity costs.

3. What is your current IT infrastructure? 

    1. Office-based servers, desktops, printers
      • Often the in-house staff is preferred by larger companies to manage in-house computer assets
    2. Hybrid:  some office servers, some cloud servers
      • This infrastructure can be managed effectively either in-house or by an outsourced Managed Services Provider, or co-managed by the IT Department together with an MSP.
    3. No Office At All:
      • Most businesses do not require a physical office – this includes most startups.

4. What is your Managed Services Strategy

    1. Purely in-house IT support and Management
      • In most cases, costs can be substantially reduced by outsourcing all IT, or specific roles and tasks.
    2. A mixture of in-house and Managed services
      • This is increasingly the strategy of companies with over 250 employees.  Keep management of key roles within the company, and outsource specific aspects of IT where the department is weak or poorly staffed. Some examples are escalated support, projects, and security.

5. Where NOT to cut costs

    1. Strategic projects that advance the company to new levels of organizational growth or collaboration (e.g., cloud migrations).
    2. Security IT managers should generally be recommending increased cybersecurity budgets. Cyber threats to small businesses, and their losses,  continue to increase.
    3. Software (you will be spending more on software in the future; the reason is many software licenses on the old boxed model were bootlegged, or copied illegally, deliberately, or otherwise.  In the SaaS world, you have to pay for every license.  However, cloud licenses must be managed smartly, or businesses will overpay for redundant or unnecessary licenses.

6. There are no Magic Bullets, BUT

    1. If your budgetary number is slashed or frozen: be strategic and specific. Save a little here, spend it wisely elsewhere.  Resist any pressure to reduce security.  If necessary, structure an IT budget that apportions more money to cybersecurity, even if it means cutting elsewhere. Budget more WISELY. 
    2. Cloud migration and achieving independence from in-house computer hardware represent long-term cost reductions! Most companies’ IT can be defined by their cloud strategy.  Every company should have either planned, started, or completed its cloud migration. There are substantial long-term savings in a successfully executed cloud strategy.
    3. That said, for companies with purely in-house IT departments, there is no simpler way to substantially reduce overall  IT costs than to engage with an IT Managed Services Provider like Power Consulting.  Power Consulting can manage some or all of your company’s IT services.

Reduce Your Information Technology Costs

Finding the Right IT Managed Service Provider to Help You Reduce Your Information Technology Costs

When all is said and done, why spend precious time trying to optimize your IT budget alone, when experienced industry professionals are waiting in the wings?

Here at Power Consulting, we have decades of experience optimizing our clients’ IT costs, using all of the above strategies and more.

If you’re interested in having a call with us about your needs, and what you’d like to get out of a business relationship with a qualified managed service provider, contact us today to set up a free consultation.