There are several ways IT departments can reduce their costs and combat the redundancies and inefficiencies that can significantly inflate IT budgets.
Therefore, focusing on finding ways to streamline resources and processes should be your main goal, as it will ultimately help you successfully cut your IT expenditures.
Consider the following:
- 60% of IT executives feel their existing IT budgets are inadequate to support business needs, yet 32% of them have to cut capital budgets nonetheless
- Small companies spend on average 6.9% of their revenue on IT, whereas large companies spend only 3.2% due to greater efficiencies and wiser technology investments
- 37% of the average IT budget is allocated toward staffing costs, or approximately $13,454 per employee for IT services
- Taking a holistic approach to streamlining IT efficiency can generate cost savings of up to 50% versus cherry picking areas to cut expenditures
As the numbers show, IT spending is not equal. The largest businesses are able to leverage improved efficiencies and economies of scale to streamline their technology operations, leading to reduced costs.
Herein lies the problem: a majority of CIO’s feel that they have to do more with less, with stagnant costs being a major factor in their spending decisions, yet they know they can save money by streamlining their operations.
The question remains – how do you do that effectively, especially if you don’t have access to the same resources as enterprise-level companies? This guide aims to provide you with some of the most impactful best practices to enable you to save money on your IT services.
Read More About Best Practices for Your IT Department:
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- The Cost of Do-It-Yourself IT for SMBs
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IT Department Best Practices
- Use Activity-Based Costing (ABC)
- Improve Your Business Processes
- Use SLAs
- Response Times
- SLA Mandated Penalties
- Leverage Project Management
- Use the Cloud
To get started, you need an understanding of the resources you’re using and what you’re using them for.
Ideally, this insight comes from conversations with various managers in the organization so that you can better understand their pain points, what tools they use, and any other factors that could impact the IT department.
This level of precise solution crafting can be achieved by using activity-based costing.
1) Use Activity-Based Costing (ABC)
Simply put, activity-based costing is an accounting method that assigns an indirect value to a specific value. It allows you to look beyond the value of your equipment and your fixed costs to determine how much your day-to-day IT management activities are costing your business.
“Activity-based costing expands the number of cost pools that can be used to assemble overhead costs. Instead of accumulating all costs in one company-wide pool, it pools costs by activity. It also creates new bases for assigning overhead costs to items such that costs are allocated on the basis of the activities that generate costs instead of on volume measures such as machine hours or direct labor costs.”
While it’s an excellent tool for gaining intelligence and insight into your actual intangible IT spending, it shouldn’t be used in a vacuum. Employ it alongside organizational assessments, inventories, budgeting, and other data gathering methods.
2) Improve Your Business Processes
As technology evolves, new productivity and process solutions are continually entering the workplace. Unfortunately, most organizations fail to get the most from these opportunities.
But the good news is that now is the perfect time to develop and implement thorough procedures and processes that will let you get the most from your technology investments.
Organizations are increasingly turning to the Information Technology Infrastructure Library (ITIL) to systematically organize their technological solutions. ITIL is a set of guidelines and standards for managing information technologies.
ITIL, in the minds of many IT executives, has become synonymous with IT best practices that can lead to improved cost management.
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- What is Software Asset Management?
- 5 Best Practices in IT Procurement
- Use IT Security Best Practices to Plan for Your IT System’s Cyber Security Needs
3) Use SLAs
A Service Level Agreement (SLA) is a set of agreed-upon terms governing overall service levels and response time frames related to resolving IT issues. SLA’s help you maintain standards by holding people and processes accountable while significantly improving your organizational efficiency.
They’re also a critical way to manage the relationship between your external IT suppliers and your internal IT department. Since they guarantee a specified service standard, you can feel confident knowing that if an IT issue pops up, your IT supplier will be responsible for resolving it quickly.
A comprehensive SLA will usually cover uptime, response times, and penalties. They are your insurance that the job is done well — without having these safeguards in place, you ultimately might not receive the service you need.
Your SLA-covered uptime refers to critical hardware, software, or any services for which you’ve established/purchased coverage. In most cases, uptime guarantees apply to your servers, any cloud services that you use, or any component of your IT system that is integral to the day-to-day functioning of your business.
Each managed service provider will offer different guarantees. Make sure that you’re comfortable with the uptimes they propose as well as their responses to potential outages.
Providers who offer unreasonably long response times can be a red flag indicating a poorly-managed service.
5) Response Times
Response times are a measure of the time it takes for your vendor to respond to issues. Most vendors have a specific channel for requesting support, so take the time to train your staff to make sure it’s used efficiently.
Premier managed service providers will support this initiative with assets, designed for your end-users, that include their contact information and details on their support level.
In most cases, it’s not necessary to have every system covered by response time guarantees. As a result, you should pick your most critical systems in your IT ecosystem to make sure that any issue is resolved quickly.
6) SLA Mandated Penalties
You need to be protected and/or compensated in the event of a breach of a critical SLA, which is why some providers include SLA penalties in their service contracts. They detail the exact type of compensation they are liable for should they fail to comply.
Different IT providers will offer different forms of compensation and will use varying thresholds for payment.
In most cases, compensation is given in the form of a credit to your account. This reduces your costs by a fixed percentage for the following month or guarantees cost-effective services.
Should a vendor prove to be inefficient, you need to have a way to terminate your relationship. Opt-out clauses are the standard method for accomplishing this. This allows you to end the contract if a managed service provider repeatedly fails to maintain the levels of service outlined in the SLA.
7) Leverage Project Management
For organizations with infrequent and straightforward IT projects, using Project Managers doesn’t necessarily make sense. However, as your business grows and pursues more advanced technology-based projects, they can be an important asset.
The vast majority of Fortune 1000 companies have used functioning project management teams. Since they are primarily focused on business success, project managers are useful for searching for ways to promote fast growth while controlling costs.
Finally, they’re fantastic at recognizing when it’s time to bite-the-bullet and move on; ensuring that projects don’t drag on and subsequently saving your organization a lot of money that might otherwise have been needlessly thrown away.
They will, therefore, have a much more thorough understanding of how long it’ll take to complete your IT project on time, so you can budget accordingly — and not be taken by surprise.
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8) Use the Cloud
The advent of cloud computing represents a significant opportunity for businesses of all sizes.
From offering flexible and scalable computing power that’s available when you need it, to providing enormous cost savings (from not having capital hardware acquisition costs to worry about), cloud computing opens the doors to limitless possibilities and can empower businesses like never before.
A major benefit of cloud computing is the lack of a need for a physical infrastructure to manage.
These remote systems can now offer tailored and scalable data centre products on subscription, “as-a-service” model. Server maintenance, patches, upgrades, application deployments, backups – every aspect of your computing infrastructure can easily be handled for you.
Because of these factors, moving from a self-managed IT infrastructure to a cloud-based environment can pay enormous llong-termfinancial dividends.
PCM Canada leverages over 30 years of experience aiding clients across a vast array of industries. Contact us today to book a free 30-minute consultation to learn how we can help you find cost-savings.