IT Cost Savings: Quick Savings for Long-Term Gains

Do you think in the short or long term?

For many companies, short-term thinking prevails, often leading to revenue loss over time. Long-term thinking involves planning for the future and making strategic IT cost savings for a more sustainable business.

IT costs present an opportunity for quick savings by streamlining processes, providing online help, and avoiding redundant work. This saves employees time, allowing them to focus on their core tasks. The right software can impact your bottom line almost immediately.

It’s essential to prioritize your IT cost savings. Here is a list of topics to ensure your IT cost savings projects reduce expenses and increase revenue:

• Why are IT cost savings vital in 2023?
• What are the two types of business costs?
• Strategies to make IT cost savings
• 3 IT cost-saving project examples

Why are IT cost savings vital in 2023?

IT cost savings are increasingly essential due to rising technology costs. With numerous IT products available, selecting the best ones for your business is becoming more complex.

In mid-2022, the global business outlook was uncertain due to rising inflation and energy costs, making cost optimization a critical factor in maintaining profitability.

Inflation increased by 8.6% by 2022 in the U.S., the fastest in 40 years. Additionally, energy costs rose by 34.6% year-over-year, impacting the broader economy and increasing energy and hardware costs for enterprises. Consequently, many companies failed to meet their earnings targets in early 2023.

Finding ways to make IT cost savings allows businesses to remain competitive while maintaining their digital resilience.

What are the two types of business costs?

In business, costs are classified as fixed or variable. Both types are crucial for profitability, though they affect the business differently.

Fixed costs

Fixed costs are expenses that don’t change with production or sales volume. They’re usually time-based and include rent, salaries, utilities, insurance, and loan payments.

Adding fixed costs to your small business can be risky because they must be paid regardless of sales volume. This includes taxes, business licenses, and overhead.

Variable costs

Variable costs fluctuate with production volume. They include raw materials, production supplies, labor paid per unit, commissions, delivery costs, packaging materials, and credit card fees.

Some accounting statements refer to these expenses as the “Cost of Goods Sold.”

Considering different cost types when calculating IT cost savings is essential for creating a comprehensive strategy.

10 strategies to make IT cost savings

Follow these 10 strategies to optimize your IT cost savings efforts and achieve a high ROI.

1: Aim for immediate impact

Focus on cutting costs with a short-term impact, such as monthly or quarterly expenses paid on a pay-as-you-go basis, rather than yearly costs.

2: Reduce expenses, but avoid freezing

Focus on reducing or removing expenses to save costs. Avoid temporarily freezing costs, as they may return later, diminishing your cost optimization efforts.

3: Money is the major resource

Select items that directly affect cash flow in the profit and loss statement, rather than noncash items like depreciation or amortization.

For example, cutting costs in cloud services results in actual cash savings, unlike decreasing on-premises software licenses or owned assets like hardware. Selling and leasing back assets can also generate cash savings.

4: Cut in one effective sweep

Organizations often don’t make substantial cuts initially, leading to repeated cost-cutting measures. This cycle can harm productivity and morale, especially with recurrent staff cuts.

5: Review accounts thoroughly

Collaborate with your finance partner to understand detailed expenses, expense accounts, and essential balance sheet accounts, including expense accruals and prepayments.

Use this information to identify cash reductions that can create an immediate impact.

6: Prioritize uncommitted and unspent expenses

Assess your contracts for renegotiation and termination clauses. The initial impact will be on unspent or uncommitted payments unless refunds can be given or payments collected.

7: Consider capital

While operating expenditures (opex) are usually more adjustable, cutting down on capital expenditures (capex) is possible.

Since roughly a quarter of the average IT budget is allocated to capital expenses, consider all IT expenses to make quick reductions.

8: Remember that sunk costs are not valid

When trying to save money, people often say that “sunk costs are irrelevant,” meaning past expenses shouldn’t influence future spending choices.

This may be true for quickly reducing costs, but it’s essential to consider whether the savings outweigh the benefits of continuing with the current approach.

9: Address discretionary and nondiscretionary cost

Cutting expenses for discretionary items, like new projects or extra services, may be easier. However, it’s also possible to reduce necessary costs like IT infrastructure and operations by decreasing usage or service levels.

10: Confront fixed and variable costs

Fixed costs remain constant regardless of activity or volume, like office rent, subscriptions, and payroll. To save money, aim to eliminate these costs.

Variable costs change with activity or volume, such as phone usage or hiring contractors. To save money, focus on reducing and eliminating these costs.

3 IT cost-saving project examples

How companies utilize technologies for IT cost savings can inspire and motivate, reinforcing your understanding of how to plan and implement your IT cost-saving efforts.

Ocorian: E-signatures

Financial company Ocorian implemented a new e-signature system to reduce costs associated with paper signatures by enhancing their multi-touch signing processes, benefiting both the organization and its clients.

This allowed Ocorian to offer staff and clients the option to sign agreements remotely, ensuring business continuity while adhering to government requirements for remote work.

Ocorian’s digital transformation through technologies like e-signatures enabled business continuity during the pandemic, improved client service, increased efficiency, and yielded IT cost savings.

These digital tools will likely continue benefiting Ocorian by providing a more agile and efficient way of conducting business through reduced IT department costs.

Thermo Fisher: DAP

Thermo Fisher Scientific’s decision to implement WalkMe as part of its digital adoption and change management efforts demonstrates its commitment to efficient onboarding, training, and employee engagement as part of its IT cost reduction initiatives.

Using WalkMe for their DAP tool and change management guidance, Thermo Fisher employees can now access customized in-app advice and real-time instruction for platforms like Salesforce and Workday.

These changes mean employees can receive on-the-spot assistance and support, increasing productivity and reducing the need for external support channels.

The central IT cost-saving advantages Thermo Fisher experienced were as follows:

• 20% reduction in Salesforce®-related support tickets.
• 70% engagement during Workday® onboarding.
• 83% of users rely on WalkMe for ongoing training and support.
• Eliminated monthly live training sessions.
• 2000% improvement in data accuracy.

This use case shows how streamlining training can save significant resources as digital adoption rates are reduced, and changes stick.

Christus Health: IT planning platform

CHRISTUS Health’s IT Finance team recognized the need to streamline their planning process.

In changing this process, they aimed to achieve the following:

• Align budgets with project and operational demands.
• Improve business unit engagement.
• Address shadow IT related to SaaS applications as part of their IT cost savings efforts.

CHRISTUS Health decided to leverage a 12-week window between budget cycles and implement a business and resource management platform to achieve this.

Their partner worked swiftly to configure their new platform and provide training to managers, enabling significant cost reductions quickly.

By doing so, they eliminated inefficiencies in data collection and gained better visibility into IT spending.

CHRISTUS Health’s IT Finance team could more effectively align budgets with project and operational demands by streamlining the planning process and gaining better visibility into IT spending.

This allowed them to allocate resources more efficiently, prioritize strategic initiatives, and reduce the risk of SaaS-related shadow IT.

Overall, the implementation by CHRISTUS Health’s IT Finance team resulted in improved budgeting processes, enhanced engagement from business units, and a better understanding of IT spending as they adopted the IT planning platform as part of their cost reduction strategy.

This new business and resource planning approach leads to more informed decision-making, resource optimization, and higher IT cost savings.

Invest in IT cost savings today

Investing in IT cost savings is vital for any business because making an upfront investment now allows organizations to save on costs in the long run, significantly improving their overall operations and profits.

So don’t wait—invest in IT cost savings today to secure your company’s sustainability tomorrow.