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Five quick wins for IT cost reduction

5 quick wins for

Procurement and finance teams are under constant pressure to make budgets work harder, and IT and technology spend is under particular scrutiny. While keeping the lights on consumes a significant proportion of spend, there are always new strategic projects that also need funding, especially with the acceleration of digital transformation.

Subsequently, any IT cost reduction is welcome, be it driving cost efficiencies or creating new savings. This will help you to achieve a balance between present and future IT, allowing your organisation to achieve more without breaking the bank.

Here are five, proven quick wins that will help you achieve this.

1. Licensing audits

Software licensing is incredibly complex; too few, and your business could be fined, but holding too many licenses is a blatant waste of cash. The wrong license type is also a waste – why pay for features you aren’t currently using?

An audit by a licensing specialist is non-invasive, helping you to understand your current level of coverage and where savings could be made. A licensing partner will also help you invest prudently, identifying software solutions that allow you to work smarter, rather than cheaper ‘workarounds’ where the headline cost saving is quickly cancelled out by the extra time and effort required to use them.

A partner will also ensure your licensing is aligned your strategic objectives, so that you have the applications needed to grow the business.

2. Consolidating spend and earning rebates

Working with lots of vendors should help you secure the keenest prices. However, the time spent managing so many accounts and relationships will quickly eat into the savings.

Consolidating suppliers and working with a smaller group helps to reduce those overheads. This is particularly true if you can negotiate a rebate deal with your partners.

Rebate agreements vary but they all have the same outcome – a cash repayment when certain pre-agreed conditions are met. A rebate scheme encourages loyalty and provides a sound financial reason for consolidation. At the end of the rebate period, you receive a cash injection back into your IT budget, giving you ‘best bang for buck’ on your spend.

3. Maximising vendor initiatives

Technology vendors typically prioritise sales of certain products and services at a given time to maximise their profit margins. Unfortunately, the vendor’s agenda and timing rarely aligns with your own.

You and your IT team must take the lead, appreciating and utilising vendor initiatives, such as pricing bundles and incentives, to help you save money. You also need to be familiar with their financial cycles, to understand what’s important to them and when. This will help ensure the purchases you make are well-priced and in-line with your strategic goals. Failing to understand the initiatives and cycles will almost certainly result in unnecessary or wasted spend.

Take a look at our top tips for maximising value from vendors to learn more.

4. Extending asset life cycles

When you make capital purchases, you depreciate them over time, usually four or five years, and then look to refresh the kit at the end of the depreciation cycle. At the same time, vendors tend to operate on a three-year cycle for refreshing their hardware. The problem is that these cycles rarely align and you can end up with a choice between out-of-warranty kit and an expensive and unnecessary refresh.

Encouraging your IT teams to extend the lifespan of their existing assets can get around this, not only so that you can work to your depreciation cycles, but also to stretch the return on investment on the kit. An experienced post-warranty partner can easily support this – and help you avoid the costly disruption of upgrading.

Some organisations report cost savings of as much as 70% when using post-warranty maintenance. Our recent article on this topic provides more details about how those savings can be achieved.

5. Moving to an OPEX spending model

Traditional capital investments create several operational issues. Assets must be specified to meet current and future operational demand, frequently resulting in over- or under-provisioning and wasted spend. For the CFO, CAPEX assets must be depreciated over time, limiting how they can be used to offset profits.

Using the hosted resources of cloud or pay-as-you-go models, your organisation can adopt an operational expenditure (OPEX) model. This has two advantages.

First, all OPEX spend can be written off immediately, making this a very popular choice with the CFO. Second, this new model allows you to pay-as-you-use, ensuring you always have the capacity you need at any given moment without over-provisioning. Cost scales up, and down, in-line with demand, offering an opportunity to quickly cut costs when required.

However, it is important to undertake a review of the whole landscape, operationally as well as commercially, so that you can work with your IT teams to make informed decisions about what will work best for your organisation. An experienced partner can help with an objective viewpoint and in-depth knowledge of how different technologies can work well together.

Get in touch today and find out what you could save