For organizations, eliminating unnecessary costs should be second nature. This applies across all business functions, especially in IT. Savvy CIOs are constantly looking for opportunities to reduce costs, eliminate waste, and maximize value. But sometimes this enthusiasm can go too far. Eager cost-cutting can leave the IT department vulnerable to common issues that end up costing more money down the line, causing more damage to the business than if the cuts weren’t made in the first place.
Understanding where cuts are needed, how much to cut, and how to approach it is an art form in itself. With IT leaders under enormous pressure to pave the way for innovation with a tight budget, it can be all too easy to fall for simple but detrimental mistakes when trying to save money.
Here are 7 real-world IT cost-cutting mistakes you need to avoid.
1. Cutting costs without thorough assessments
“We need to make cuts, and we need to make them now!” This rash way of cost-cutting decision-making spells trouble for many organizations. Making cuts without careful analysis can negatively impact the business’ critical IT operations, hindering performance and productivity. Not having the full picture before taking action prevents you from truly seeing where the avoidable costs are happening. This can lead to situations where you may have scaled down on a certain area, e.g., downgrading your IT asset management software license, but are not seeing a significant reduction in spending. In worst cases, cuts in this way can even aggravate the issue, costing businesses a fortune later on.
Leveraging all the data and information you have at your disposal helps you orient where you can make cost-saving improvements and how to implement them. Not only opportunities in terms of monetary gains but also in time gains. Having a complete grasp of what’s going on in your IT management can assist in making well-informed IT cost-cutting decisions that can truly benefit the organization.
2. Not getting business stakeholders involved
It can be tempting to forgo discussions with stakeholders to realize cost savings faster, but IT departments can no longer work in a silo. What they do permeates across the entire organization, so making changes in the name of cost-cutting without the other departments’ input can be harmful to the business, not to mention the impact it will have on IT’s relationship with the other departments.
By getting key business leaders and stakeholders involved in planning these initiatives, you can gain the insights required to inform you how tech is being used, what can be scaled back, and what might be a need in the future. Including the finance and procurement teams in the conversations can certainly help in finding cost-saving opportunities that could’ve been easily missed, such as the renegotiation of licenses.
3. Going for the cheapest solution
When it comes to your tech solutions, for example, selecting your ITSM system, the cheapest one isn’t always the best, or even the most economical, option. This can even cost the business more in the long run. What looks like a great deal from the beginning can easily eat into your budget in the form of forced upgrades, expensive renewal costs, or much-needed features locked behind extra modules.
As your business grows and transforms, its needs will change too. So, when you adapt your cheap solution that contains all these paywalls, suddenly, it’s not so cost-effective anymore.
Another situation you could find yourself in is when the quality of service is not up to the standard of what you would have liked. But as the saying goes, “you get what you pay for”. Not all software is created equally, and the price is only one of the key elements to look out for when choosing what to invest in.
That’s not to say that you won’t find tech solutions that are affordable and of great value. But when searching for your tech solutions, it’s not just the initial cost savings on implementation that needs to be considered, but their potential for long-term gains too. A solution that can better equip you to meet your goals, though might seem more expensive at first glance, will probably be a much more sensible investment.
4. Not investing in employee training
Whether it’s for learning about new software, new practices, or helping employees develop their careers, skimping on employee training can cost organizations big-time. This pretty much applies across all departments, but especially with IT. Technology changes at a rapid rate, constantly providing new challenges. If you want your organization to keep up, your people will need to have the right knowledge and skills.
Say, you’ve invested in new software, but decided to skip out on the training sessions as you feel that your team can figure things out themselves. Not only do you risk an unsuccessful software rollout across your organization, but you could also miss out on great features just because you didn’t get to fully learn how to take advantage of them. The inability to dedicate training time when implementing new tools can hinder their uptake and usability, preventing you to extract the most value from your tech investments.
Not devoting resources to your employees’ development can also significantly impact the employee experience. If your people don’t feel like they’re growing professionally or learning something, you risk employee disengagement, which can then make it difficult to retain your best people.
5. Forgetting about security
When things are going fine, it can be easy to forget the benefits of something as it’s not always visible. This is the case when it comes to cybersecurity. Too often its significance only becomes prominent when an IT incident or security breach occurs. The average global cost of a data breach is US$ 4.24 million, and the rise of remote working has exacerbated the issue. Despite these expensive risks, on many occasions, cybersecurity budgets are where cuts are often made.
And this is not just about the direct cybersecurity efforts an organization makes. Not upgrading your software for the sake of saving costs can leave your technology open to cybersecurity risks. An example of this is organizations that still rely on outdated legacy ITSM systems to manage their key IT service management processes. To learn more about this, check out our legacy vs cloud ITSM article.
Finding where you can reduce spending is indeed very challenging, but with so much at stake, cybersecurity should not be the place to cut corners.
6. Letting go of staff too quickly
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. So, when you’ve discovered a way to automate certain tasks that make up a part of their role, it can be so tempting to regard the position as redundant.
However, you risk losing highly sought talent and expertise. How will you manage those automated tasks? Who will fix them when things go wrong? How can you further optimize your IT operations? Automation is not meant to replace people, but instead, to be a tool that helps everyone to achieve more by relieving them of repetitive, manual tasks. This will give them back the time needed to focus on the more complex aspects of their role or redirect their energy to projects that require their technical knowledge. But by letting go of staff too quickly, you will be losing skilled talent that will be even more expensive to rehire later.
Recruitment is an expensive affair and with the labor market as competitive as it is right now, you will lose the people that will be essential to your future endeavors. Not to mention the time for onboarding and training that will need to take place first to get new employees up to speed and working productively. These resource costs can be prevented by careful reworking of people’s roles and responsibilities as you introduce IT operations automation to the business.
7. Not measuring and reporting the impact
Many IT initiatives have cost savings as one of the key objectives behind them, but often these gains are short-lived. According to Gartner, only 11% of organizations maintain cost savings for three consecutive years.
This is because too often organizations take on large projects to achieve their cost-cutting goals. While the initial results from these drives can be very satisfying, the drastic changes can be too big a bite for many, eventually leading to burnout or enthusiasm fizzling out. Without considering how to make these changes sustainable long-term, it’s too easy to go back to the old way of doing things and lose out on achieving the best business outcomes.
It usually boils down to not being able to see the progress beyond deployment. The rollout of any new strategy is just the end of the beginning. Successful implementation of new initiatives comes from continuous monitoring of performance and ensuring everyone’s on board with the latest changes. Understanding how to track and measure how things are going, as well as reporting on the impact helps everyone stay focused and maintain the benefits of such projects.
Reducing costs where possible is an ongoing challenge for IT leaders but doing it rashly can cost you more than you bargained for. Sometimes it’s inevitable and it makes sense to move swiftly, but, when possible, careful planning and consideration of how cuts can impact the organization must come first before any action. With this, you can avoid very common cost-cutting mistakes that are more damaging to the business.
SOURCE: Hannah Mandapat(2022 July 26) 7 Real-World IT Cost-Cutting Mistakes You Need to Avoid. IFS Blog. https://blog.ifs.com/2022/07/7-real-world-it-cost-cutting-mistakes-to-avoid
