IT costs increase over time. There are lots of reasons for that, but also lots that you can do to manage and reduce them.
Systems become embedded in your business: the better a system works or the more central it is to your business, the more that workflows and processes grow on top of and around it, and the harder it becomes to remove. Meanwhile, Software as a Service (SaaS) has made acquiring new systems effortless. Anyone with a credit card can sign up for a new system. The result is spend that ticks up over time.
There are many ways to manage your IT costs. Here are just six plays from the playbook.
Find out what you're actually paying for
The 'official' IT budget is likely only a part of your spend picture. The IT budget will, appropriately, be subject to review and scrutiny as part of the annual budgeting process. IT costs are scrutinised, and if your IT budgeting is mature, you'll be doing things like reviewing costs on a unitised basis. And if you're good, you'll understand your cost drivers, which will include supported computers, number of applications, and your cyber security risk appetite (yes, a strong cyber security posture takes money).
However, unless you have the right controls in place there will be IT spend in other budgets, which may not be subject to the same level of scrutiny. You may be paying for the 'official' system in the IT budget plus several other alternative or 'shadow' systems in other budgets. This is, of course, wasteful, but it also creates complexity for your workforce, additional technical work, and increased risk.
Pick your systems carefully
Having fewer systems costs you less. Letting teams or individuals choose their own tools may sound enlightened and tech-forward, but it makes it harder for people to share and collaborate, let alone standardise and simplify your business processes. The number of systems you have is a cost driver, but it's not just the licence: each system carries support, integration, security, admin, and more. Standardise and resist the urge to have the latest system. There is almost always a newer and better option. Part of that is human nature: the grass is always greener on the other side.
Every system is a puppy
A good analogy is pets. Kittens and puppies are undeniably cute and adorable. But responsible ownership is a commitment to care for the pet throughout its life. Systems are the same. They become members of the family and require care over their full life cycle. Make the decision rights clear in your business: who can approve a new system? It doesn't need to be bureaucratic, but it needs to be transparent, rational, and effective. Rationalising your systems once they're already embedded is a painful and expensive activity.
Check your service levels
Businesses routinely pay for service levels that they don't use or don't need, such as premium support for systems that don't need it, or capacity that's sized for a 'just-in-case' peak that never arrives. And you may be over-servicing your internal customers, by providing levels of IT services that are nice, but not needed. Review your service tiers against actual need. Downgrading a service level is a valid way of reducing costs.
Negotiate
Sounds obvious, but many businesses simply pay the renewal. Vendors have levers they're willing to pull for the right deal: timing a renewal to their quarter or year-end, trading a multi-year commitment for a better price, or consolidating your spend with fewer suppliers to gain heft, especially in a 'compete' scenario with one of their key competitors. I've negotiated from both sides of the table, and when you take a 'win-win' approach it unlocks options.
Take a strategic approach to sourcing
Longer term, think about which capabilities belong in-house and which you buy. Keep the capabilities that differentiate you in-house and consider outsourcing non-core work.
Managing IT costs is a game of whack-a-mole (or respawning for the gamers amongst us) — knock one down and another pops up. The game play rewards the player who pays attention and is quick and nimble.