Cost optimization is more than just cutting down costs in your organization. It also means reducing costs on items that do not add value to your organization and spending more on items that maximize on profits and the effectiveness of the IT department.
Research has shown that 55% of the world’s budgets on IT are spent on operation costs and infrastructure. IT cost optimization is not as easy as people would love to believe. There are 3 main challenges that an IT expert and a business experience when trying to optimize IT costs. Governance is the main challenge. A few IT organizations are not run like a business. This is a recipe for failure. An IT organization must be run like a business. This way, you are able to control profits and losses. This makes it easier to determine where to put in more effort to ensure that the business expands. The budget has proven to be a hard task. It is Imperative to make certain that the business is able to make savings at least each month. The budget should be well-thought. Lastly, the IT cost transparency has to be top-notch. You must know how much is enough.
These challenges can be overcome by using effectual IT cost optimization methods. Each business has its own IT issues. This is why there is no standard method of optimizing on IT. Nonetheless, there are a few basics that each organization must consider. These include:
Assess opportunities that increase profits and reduce loses
In order to optimize, you must be sure of the avenues that will cut on costs. It is important to note ways through which the business is unnecessarily investing in. An unnecessary investment is equivalent to a loss. Therefore, ensure that you stop investing in areas that do not benefit the business in any way. This is also a time to explore ways through which the business can invest and get good returns. You need to ask yourself a few questions. For example, is the software you have expensively paid for benefiting you in any way? This is the time to do a major clean-up in your systems. As much as you need to reduce costs, it is good to risk spending money where you think is necessary. For example, some software have both a paid and free version. Unfortunately, most of the free versions have locked functions. If your business relies on the locked functions, it is prudent to fully invest in the software and buy it.
Developing a cash culture
A cash culture not only focuses on profits and losses but also balance-sheet matters such as inventory, receivables and liquidity. The business must develop a culture whereby money is monitored and projections made. This way, you are able to perfectly run the business in the present and also secure a good future.
Developing a management system that looks at the drivers of costs
In order to cut down on costs, it is vital to understand what drives the business to spending. A management information system is better placed in determining this. Once the drivers are identified, measures have to be put in place to ensure that only necessary costs are incurred.