It happens to everyone at some point. Your budget gets slashed; the economy tanks; you’re suddenly in the red thanks to cloud sprawl. Whatever the cause, you’ll likely face a mandatory cost cutting initiative at some point in your IT career.
While cost cutting is a reality, it is fundamentally different from ongoing cost optimization. You should be practicing cost optimization as part of your regular duties, reviewing spend and ensuring the technology, hardware, software, and services in use across your organization are serving their business need and appropriately configured in scope and performance.
By formulating and practicing a cost optimization protocol, you’ll be prepared should the day for cost cutting ever come, while also gathering evidence for the impact IT has on the overall bottom line.
Cost cutting tends to be unfortunate, sudden, and mandatory. It is often organization-wide, though if your department is overspending, you may be singled out for cutbacks. Cost cutting commonly materializes in the form of layoffs, benefit reductions, pay cuts, office downsizing, shorter hours, or large efforts like debt restructuring. A first step towards IT cost cutting that doesn’t involve firing somebody might be outsourcing services like security for which you may not have dedicated staff, consolidating systems, or moving to centralized services. But these steps might not deliver the corrections needed and they may take too much time.
To avoid the potential crunch of cost cuts, continual optimization of your IT spend is essential. Careful planning also helps you innovate and implement new features and services, as you are less likely to be blindsided and forced to cutback before you can pursue that new SaaS product.
Cost optimization is an ongoing and holistic approach to efficient IT budgeting and spending, tracking every asset, service, software license, and employee to justify their expense and identify areas for improvement before drastic measures are needed.
Begin your process by benchmarking your current spend against companies in a comparable industry and of a similar size. If you find spending outweighs your peers in specific areas, those are your first stops for optimization.
Most optimization targets should be reviewed at least quarterly. Below are some key areas to track spending.
Software Licensing – inventory your licenses, their parameters, and their terms. There are often idle licenses floating around enterprise IT environments that can be retired. You might be able to consolidate or migrate your licenses between platforms or even negotiate a discount based on your purchases or future plans.
Resource Utilization – cloud sprawl is a serious problem at many organizations, and closely tracking your overall resource utilization can identify VMs, database tools, automation processes, and other components that have not been used recently and are not supporting any critical apps or services.
Cloud Migration – the great cloud migration is largely complete. Most orgs are using a wide array of cloud services and platforms. But if you have a large legacy IT stack to contend with, you likely still have many candidates for migration, and when weighing new apps you should look to the cloud first. This helps shift to an OpEx spending model and can reduce labor, setup, and scaling costs.
Automation – serverless platforms, containers, and cloud services can be automated and scripted, reducing the amount of human input required for tasks like process scheduling, provisioning, monitoring, patching, system configuration, service delivery, and demand scaling. While you will have to manage and optimize your automation processes, which can come with runtime and storage costs of their own, the reduced effort for your staff is well worth it.
Centralization, Standardization, and Consolidation – moving all IT under your purview with a unified slate of apps, hardware, mobile services, and communication and collaboration platforms leads to significant administration efficiency gains. Multiple departments don’t need their own document sharing and editing tools, for example. Strive for an organization-spanning suite of apps and services that can serve the vast majority of your business requirements.
Enabling Self-Service – By empowering your end users to procure standardized services from a self-service portal, you free up your staff to focus on innovation and large scale initiatives rather than assisting with provisioning and configuration.
These categories help you justify IT business value and demonstrate exactly where and how your budget is helping the overall organization. You can point leadership towards your efforts to reduce low-value components while gaining efficiencies throughout the IT lifecycle. By framing IT expenditures around business activities, you can ground abstract concepts like serverless computing to demonstrate value. Meanwhile, you’ll be better prepared the next time cost-cutting rears its head.