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Optimizing IT Costs Through People, Processes, and Technology

Article Written by Luis Colon, Software Engineering Manager and Lead Architect at TeamQuest Corporation

Every IT organization needs to eliminate unnecessary costs, but what's the best way to do it without lowering your business value or inducing risk?

Thanks to the complex nature of a IT modern system, there are now many points at which redundancies and inefficient design can build up over time. Even though there are abundant opportunities for cost-cutting, it's important to remember that saving a few dollars in IT spend will never be worth lowering your businesses value or inducing risk. This can be a challenging balance to strike, but examining your entire organization will yield many opportunities for rational, safe cost savings.

When thinking about cost reduction, IT managers should consider the opportunities in three categories: people, processes, and technology.

1. People

Focus on Structure
Reducing costs through personnel changes is much more than simply letting off or outsourcing employees. Taking a deep dive into your org chart is a great first step.

First, see that each role and responsibility is clearly defined, especially in relation to hierarchal relationships. Is it evident who's supervising whom? Look at the overall shape of the chart: is it relatively wide and flat, or do you have dense layers of management stacked on top of each other? Flattening the chart can be a good strategy, simplifying the hierarchy while also reducing costs. A company with fewer managers concentrates decision-making power and can make changes more nimbly.

Outsource With Care

Of course, outsourcing can be a highly effective cost reduction strategy. But its risks need to be considered accordingly. For example, it is extremely rare that the cost savings of outsourcing a mission-critical process will outweigh the danger of placing that process overseas. Outsourcing can be a great way of dealing with temporary increases in demand for simple or common tasks. It provides HR elasticity, similar to the way the cloud provides infrastructure elasticity.

2. Processes

Simple processing changes can lead to enormous cost savings. A major healthcare company saved $1.6 million in a year just by shaving five seconds off their average call time. As the saying goes, time is money, so IT managers would be wise to prioritize cutting time-wasting steps and aspects from their critical processes.

Understand Every Step

A substantial initial investment in consolidating processing steps can more than pay for itself through new efficiencies in the long run. Identifying and eliminating duplication of effort will be crucial to this investment. New employees often pass through and put their individual touch on processes, but after they leave or move onto a different project, no one knows why the task exists. A little time spent figuring out which steps are truly necessary can result in big savings.

Don't Be Afraid to Go Manual

Automation is a natural choice for speeding up processing speeds, but make sure to look at the other side of the coin: turning automated processes manual. Sometimes, automation isn't implemented properly, and the result is slower than manually doing the same task. Short-term savings can be had by switching automated tasks over to manual until a better automated solution can be found.

3. Technology

Don't Pay Twice for the Same Thing

Just like with processes and personnel, saving money on technology is all about reducing duplication. Go through all your applications and see if any perform the same function. This is an especially good move to make at larger companies that have merged with or acquired other companies. Cutting out even part of your duplicated functionality can save on license, maintenance, training, help desk, and infrastructure costs.

Drive a Hard Bargain

Be aggressive when it comes to pricing your tech services. Check with your peers at conferences and with analysts to get guidance on what the terms of any new agreements ought to be. Negotiate fiercely with your vendors, and pit them against each other to get the lowest possible price.

Embrace the Cloud

With cloud-based services you can avoid costly upfront capital expenditures and gain flexibility. The cloud is an optimal way to take risks because of its flexibility -- if a new service is less than successful, you haven't sunk a large amount of cash into infrastructure you no longer need. You just release your capacity back to the cloud.

The cloud also gives you the freedom to cut back on excess capacity. Of course, you don't want to cut into your emergency backup capabilities, but it doesn't make sense to be paying for much more than you need on a day-to-day basis. Eliminating unneeded hardware will reduce maintenance expenses, but it also saves on license costs and administration.


About the Author

Luis is a passionate and recognized leader in IT and agile development (XP, Scrum, Lean Startup, MAXOS) and frequent contributor to IT conferences and publications. He has multiple certifications in agile development including Scrum Master and Product Owner and SAFe Agilist. Apart from his role as Software Engineering Manager and Lead Architect at TeamQuest, Luis contributes content to TeamQuest publications from an engineer's perspective.  

Luis Colon

Published Tuesday, November 15, 2016 8:01 AM by David Marshall
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