It’s not uncommon for companies to feel that their IT costs are too high. Sometimes this may be due to a lack of value being delivered, or just raw cost in comparison to similar businesses.
In either case, a slowing economy forcing many business to look for ways to cut costs only serves to further highlight the issue.
The reality is that most SMB’s do spend too much money on IT. Or rather, they spend money on things that don’t deliver a lot of value, that could be stripped away or replaced with better alternatives.
The challenge many SMB’s face however is that they are not technical. They lack the knowledge to know which pieces can be removed and which things are critical.
In this post we will look at how a business can responsibly cut unnecessary IT costs and optimise tech spend.
Cart Before the Horse
Surveys conducted by Australia’s largest technology distributors show that most buying decisions start with the product. That is, products are introduced showing off their capabilities and features which later become the justification of a purchasing decision.
This is particularly true for cyber security products. Non tech savvy SMB’s are shown new products with enhanced security features and are convinced of a need they never had previously.
The challenge with this is that whilst the product may be great and have value, the product may have no intrinsic value to the business it’s being sold to. The best luggage in the world has no value to someone who doesn’t travel.
Decisions should be based on a commercial requirement. Whether it be mitigating a risk or chasing opportunity, the product should be the answer to a question worth solving.
In the example of cyber security, reasoning should not be ‘better security’ or ‘enhanced encryption’, rather they should be things like:
- Reduced likelihood of losing customers due to a breach
- Time to recover from a major incident will be hours not days
- The scale of disruption of an incident will be limited to x.
The #1 way to reduce IT costs responsibly is by removing or downgrading products or solutions that don’t directly align to your businesses operational needs or risks.
Knowledge is Power
Whilst the above may be true, what if you don’t know how to connect IT solutions to business requirements? What if you don’t know a solutions capabilities or know the available alternatives?
The truth is, you don’t know what you don’t know. This is where your IT support provider should come in. The challenge is that most providers focus on the delivery of services, and make little provisions for the level of advisory needed to make these decisions.
The provision of thorough consulting and advice is labour intensive. There’s simply no way around the fact it takes time to audit, review, understand and consult. If provisions for this have not been made in your agreement, you simply won’t be armed with the knowledge you require.
Sometimes you need to spend more to save more.
There is a point where spending more on additional services is cost beneficial. More than half of most businesses tech spend is in hardware, software and related projects. Being equipped to make good decisions can reduce these expenditures by 25-50%.
You may find your business has outgrown traditional managed services and would benefit from greater knowledge and command over your IT costs. (See Profitable IT: Reducing IT Expenditure)
If you want a sustainable way to optimise technology spend, you need a partner that is able to provide informed recommendations, clearly linked to commercial objectives.
Where to Start
Suppose you don’t have the knowledge and understanding to do this on your own, and changing providers just isn’t an option right now. Below are some key areas we commonly see overspend or misplaced funds that you may want to look into.
Infrastructure (Physical & Cloud)
It’s not uncommon to find companies that can reduce their infrastructure spend by as much as 70-80%. A LOT has changed in cloud technology over recent years. The case for servers, private cloud and similar solutions is diminishing.
Many providers are reluctant to review client setups and tend replace like for like. This may be that the existing solution is a revenue stream or simply a lack or resources to design alternative approaches and business cases unless asked for them.
Software Management
SaaS based subscriptions make up a significant portion of IT costs these days. Managed poorly, SMB’s commonly overspend by 10-15% or more on subscriptions. A combination of clever license strategies and user management can save SMB’s 100’s or even 1000’s of dollars every month.
Overcorrection
Ever paid $6 for a bottle of water because you were really thirsty? It’s common in reactive environments for solutions to be oversized as a response to what was a big problem. Whether it be cloud server specs, internet connections, cyber security, etc. All should be reviewed as you may be able to save money on items that perhaps were purchased on emotion rather than need.
Backups, Phones & Internet Connections
These are items that despite everything else around them, have gotten cheaper over time. When these things fall out of contract it’s rare for the company to let you know you can now get it cheaper. Additionally, as software moves to the cloud, backup requirements have changed and you may not have the same level of requirements you once did. In either case, if you haven’t reviewed recently, this is an orchard of low hanging fruit.
Cyber Security
It may sound odd for an IT company to suggest cyber security as an area to cut back spending, but it is. Despite cyber attacks becoming exponentially more complex and common, many businesses are overspending, or more correctly, misspending a great deal of money. (See Investing in Cyber Security & Cyber Scam or Cyber Security)
Many solutions are being sold on their features, not the value they provide. As mentioned above, the cart can’t come before the horse. For the most part, SMB’s have been ill advised on how to protect their business. This costs businesses in more ways than one.
Optimising Technology Spend
Those that have played Jenga are aware of the consequences of pulling the wrong piece. You can’t responsibly reduce IT costs without understanding the impacts of removing or downgrading various components. Knowledge is power and you can’t make good decisions without it.
Some of the greatest tools for grasping the impact of spending decisions are Technology Roadmaps and IT Risk Registers. Done right, these tools provide commercial context that allows you to differentiate between sound investments and acceptable risks.
If you don’t have the internal capability, you should partner with a managed service provider (MSP) who does. More importantly, you should look for one with the appropriate provisions in their agreement, and a proven, repeatable process to deliver actionable insights.
Summary
Its challenges like this that have informed and shaped the type of service we deliver to our clients. It’s a challenge unique to small to mid sized businesses that are too big to operate haphazardly, yet too small to build internal capability.
Making good decisions and optimising IT spend for maximum ROI is crucial to businesses operating in this zone. If you feel your business is lacking the level of support and confidence you need we’d love to talk. Simply book a time for an introductory discussion.