How can CIOs control their IT budget while minimizing damage to mid and long-term business health?
According to Gartner, IT budgets are expected to increase by 5.1% this year. However, this is set against the backdrop of increasing inflation, the threat of recession, supply issues, and a continuing talent squeeze. Will CIOs be able to realize time to value for their technology investments?
Many companies are facing requirements for cost reductions in the short term, even if they are planning to utilize technology to sustainably lower the cost of doing business in the longer term. It is important to note, however, that because IT is a significant cost, there are also many ways to bring this cost down.
Having said that, reducing IT expenses requires careful planning so it does not become counter-productive. Overly radical IT cost reduction runs the risk of negatively affecting not only business health, but employee morale.
With this article, you’ll be better equipped to make the right decisions for your organization.
Introduction to IT Budget Planning
From streamlining operations to improving customer experience, there are many reasons why companies allot a hefty budget to IT expenses. On average, companies around the world spend 7.5% of their revenue on IT expenses (the figures are 8.5% and 6% for US and EU companies respectively).
Having said that, there are various ways to optimize spend, particularly if you utilize smart tools. Here are some changes you can make in your business that can help you manage your IT budget.
Top 4 Tips for IT Budget Management
Do Away With Unnecessary Licenses
The first step to IT cost reduction is understanding where you are currently spending money and why. Sometimes, expenditures expand in an ad hoc manner due to one-off projects, urgent requirements, and so on.
The bottom line is that you might be using multiple similar tools instead of just one – or paying for tools that no longer serve any purpose for your business.
CIO reports that, in the US alone, organizations wasted 30 billion dollars on unused software over four years. Such unused or underused software is referred to as “shelfware”. (Except it’s not as pretty as your grandmother’s antique tea set.)
To avoid shelfware, consider conducting a software audit, which will help you identify the software installed on the computers on your network.
With this you will be able to determine which licenses are necessary and which ones are effectively dead wood that you can terminate or renegotiate. Licenses can also be shifted to a central resource pool until they are required again.
Furthermore, it is crucial to have a workflow in place to make adjustments when a user changes responsibilities or leaves the company. Failure to do is a major reason for not terminating licenses on time.
Tighten Your Cybersecurity Strategy
Data breaches cost organizations 4.35 million USD on average. Given that, you might want to develop a data loss prevention strategy.
Because of the Covid-19 pandemic and other economic factors, many organizations are implementing hybrid work models. Nowadays, everything from remote bookkeeping to remote digital marketing is considered normal. However, remote work comes with an increased cybersecurity risk.
This is largely because, since the shift to remote and hybrid work happened so quickly, many organizations were unprepared for the change and lacked the necessary infrastructure to defend themselves against data breaches.
Even a simple solution such as using a VPN solution or antivirus software could save you up to thousands of dollars or more.
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Migrate to the Cloud
For the majority of applications, cloud computing has won the cloud versus infrastructure debate. While some applications may have to remain in-house due to regulatory or legal purposes, it’s worth considering shifting your data centers to the cloud.
Cloud migration can take some time and dedication to get right, and there may be some contractual or amortization issues to deal with.
However, in the mid and long term, the scalability and flexibility of cloud computing are likely to pay off.
What’s more, the cloud model allows businesses to pay only for what they need – there are generally no wasted extra costs on expensive hardware, maintenance and repairs, or needless storage space. Furthermore, you often will not have to pay for support or customer service.
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Don’t Ignore Tech Problems
It may sound obvious, but don’t ignore problems with software suites, computers or networking equipment. You’ll find yourself fretting over your IT budget going over for “no apparent reason”.
Dropped calls, computer crashes, and other tech issues indicate problems that will likely not go away on their own. Hence, it is best to repair or replace as soon as possible.
Conclusion
With the tips above, you’ll be able to better manage your IT costs.
As you streamline your IT budget planning, you’ll find your value and costs optimized. Be sure to review your IT expenses consistently to find opportunities to improve cash flow and reduce costs.
And speaking of reviewing expenses, NextGen Accounting offers credit card reconciliation services, bank reconciliation services, reconciliation automation, financial consulting, financial reporting, and audit and anti-fraud assurance. Our services are specially tailored to firms with vast amounts of data that are extremely difficult to reconcile.
To give you the fastest and most accurate reconciliation, we use our patented software CrushErrors, which you can also obtain as a product if you’d rather conduct reconciliations in-house.
NextGen Accounting’s management team has decades of experience and includes former executives of Barclays Bank, Bank of America, and ICBC. Contact us today for reconciliation solutions or book a free demo if you’d like to get CrushErrors!