IT Cost Optimization: What is it and techniques to save

IT cost optimization is continuously evaluating an organization’s technology processes to discover cost-saving opportunities.

IT optimization has become crucial to business success as the working landscape has changed.

As a result, IT cost reduction processes should be at the center of a business’s overall IT strategy. 

Examples of IT assets that can be optimized to reduce costs include:

• Hardware (computers, printers)
• Infrastructure (servers, networks, storage)
• Cloud services
• Shared services
• Applications
• End-user computing

The main benefit of IT cost optimization is that it helps organizations keep IT costs low. However, implementing a continuous cost optimization strategy brings even more benefits that shouldn’t be overlooked.

• Increase profitability: as a result of cost savings over time, the organization will become more profitable.
• Reduce complexity: Continuously reevaluating and reconfiguring resources will result in less complexity. Automating processes will also reduce costs.
• Reduce risk: The risk of paying for unused applications and services is reduced by examining where money is spent.
• Increased budget for innovation: Saving money through IT cost optimizations means it can be funneled back into the organization. Money can be used in other business areas to help maintain its competitive edge.

Cost-cutting initiatives and cost optimization are sometimes used interchangeably, but they are different things done for different purposes.

Cost-cutting is the process of enacting one-time direct actions to reduce expenses with immediate effect.

On the other hand, cost optimization is continually evaluating and configuring resources through an overarching IT strategy to save money through increased efficiency.

Once a framework has been established and approved between stakeholders and managers, optimization techniques can then be implemented to enact the IT optimization strategy.

1. Optimize and rationalize applications

Application optimization is one of the quickest ways to reduce IT costs. By mapping a comprehensive overview of the IT landscape and business capabilities, it will uncover areas that can be optimized.

The apps can be kept or optimized if they have a positive effect. Apps that do not provide value can be canceled or removed. The process will highlight redundant and overlapping applications.

2. Plan technology strategy and budget

Planning your technology strategy and anticipating the budget before activation is important to understand how IT services will be delivered and anticipate associated costs. Strategies provide a comprehensive overview of your IT landscape and help plan life cycles, discover optimization opportunities, and improve resource planning and allocation.

3. Actively manage vendors

By actively managing vendors, companies can:

• Negotiate better pricing: Only paying for areas of service the business actually uses.
• Get better terms of service: Avoid long-term subscriptions with expensive exit costs or non-competes that hinder the optimization process.
• Implement license recycling mentality: Instead of purchasing new licenses, reuse individual licenses for use by others.

4. Continuously transform

Continuous transformation is the cornerstone of IT optimization and cost optimization. Adaptation and flexibility allow organizations to maximize value from their IT infrastructure. Benefits of continuous transformation include:

1. Adopt cloud services if necessary: Cloud services allow companies to spend less on maintaining technical equipment or hiring large IT teams. They also help organizations retain a competitive edge through regular upgrades and developments.
2. Implement automation: Automating processes means less work for IT teams. Automation tools mimic the workforce and free up time and resources which can be used elsewhere.
3. Research business transformation ideas: To remain competitive, organizations must invest in digital business transformation. This means researching and evaluating the current business IT infrastructure and using data-driven insights to plan and execute transformation projects. Money saved through IT cost optimization can be put towards this effort.
4. Evaluate the workforce: Optimizing the workforce through performance management, setting realistic goals, and adopting a “customer-first” perspective all help organizations keep overheads low. This way, you’ll ensure that employee skill sets and tasks contribute to an efficient and cost-saving workflow.

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