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Why Your IT Costs Are So High (and What to Do About Them)

Why exactly are your IT costs so high? And what can you do about them? Check out the following article for tips....
Why Your IT Costs Are So High (and What to Do About Them)
Written by Brian Wallace
  • Technology can be powerful for your business, but it can also be exorbitantly expensive. Countless businesses, from small startups to large enterprises, struggle with excessive IT costs. 

    What should you do if your IT spending starts to exceed your capacity? How can you keep these costs down without making major functionality or security sacrifices?

    The Universal Solutions to High IT Costs

    Because there are so many different types of businesses and so many philosophies for running an IT department, it’s hard to form truly universal strategies that work for all contexts. 

    However, there are a few universal approaches that can be used to address almost any application of high IT spending.

    ·       Utilize managed IT services. Arguably the best solution is to utilize managed IT services. In this arrangement, you’ll work with a third party for most or all of your IT team needs. This addresses many issues simultaneously, reducing your personnel costs, improving overall efficiency, and potentially connecting you to cheaper and more efficient IT strategies without forcing you to sacrifice any functionality or security. The trick is to find the right IT service provider; you need to find a competent team of experts with genuine experience working with businesses like yours, and you need to find a set of services that works for your needs and budget. This isn’t always easy, but if you can find a good fit, most of your IT spending problems can be resolved.

    ·       Diagnose the root causes. If you choose not to work with managed IT service providers, it’s going to be on you to diagnose the root causes of your high IT spending. There are hundreds of little factors that can force your IT spending unnecessarily higher, and it’s your job to figure out what those are so you can address them.

    ·       Address the root causes. Making things even more complicated, each root cause of high IT spending can typically be addressed with a wide variety of potential solutions. The best solution is going to depend on your specific circumstances, and it’s not always clear.

    Why Your IT Costs Are So High

    These are some of the most common root causes of high IT costs, which can typically be addressed in many different ways.

    ·       Generally rising prices. Costs are rising across the board, thanks to a combination of economic issues. Unfortunately, there isn’t much you can do about this, but it’s still important to acknowledge. Check to see if your IT costs are rising disproportionately to your other business costs.

    ·       Core personnel costs. Many businesses strive to maintain an internal IT team. There’s nothing inherently wrong with this, and it does bring some advantages, but it also increases your personnel costs – which can be prohibitively expensive. If you feel like your department is hemorrhaging money, it might be time to reduce personnel costs by reducing staffing and working with a third party instead.

    ·       Employee turnover. Employee turnover can be ridiculously expensive, especially for technical positions. If your IT department is a revolving door, it’s important to take a look at why people are leaving so you can figure out a way to address it. Is morale low? Are people leaving your business for better-paying or more exciting positions? What can you do to retain your best talent?

    ·       In-house resources. Similarly, your IT department might face higher costs because it’s relying too extensively on in-house resources. For example, managing your own servers comes with several advantages, including total accessibility and transparency, but it’s also much more expensive than utilizing cloud services. Even if you’re not willing to abandon your in-house infrastructure entirely, you can benefit from hybridization or virtualization.

    ·       Hardware and software bloat. Some businesses spend too much on IT because of hardware or software bloat. In other words, they spend money on equipment and services that they don’t really need. Effective trimming can assist you here.

    ·       Inefficient resource allocation. Inefficient IT planning and resource allocation can cripple your budget, minimizing your capabilities while consistently increasing your spending. Visualizing your network and achieving greater transparency can help you diagnose these specific issues so you can effectively address them.

    ·       Lack of a coherent purchasing strategy. You might also be spending too much money upfront. If you’re willing to pursue alternative options, like purchasing used hardware or using open-source software, and you’re willing to negotiate with your suppliers, you can save a lot of money.

    ·       Scaling issues. Scaling your business is always expensive, but it’s even more expensive if you don’t have an efficient scaling strategy in place. In an ideal situation, a business would proactively plan for scaling, creating IT infrastructure that’s easy to expand over time – but unfortunately, many young businesses rely on improvisation, so by the time they achieve a bigger size, they have inordinately complex IT problems to solve. It’s tough to correct this after the problem has already set in, but a “back to basics” approach could help you strip down your architecture and achieve the scalability you always should have had.

    High IT costs can bog your business down, especially if you don’t address them proactively. But with the help of a managed IT service provider, and a willingness to pin down and address specific root causes, you’ll be in a much better position to keep these expenses under control.

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