Top IT Cost Reduction Strategies for 2024

ITSM fuels your organization's agile and productive direction. However, many organizations (31%) still use outdated IT systems. This not only leads to additional running costs but also slow processes and loss of productivity.

Due to these inefficiencies, organizations are losing up to $1.3 million a year, and IT leaders are under pressure to optimize their IT budgets. They are now more focused on adapting innovative IT investment measures and allocating resources judiciously to IT.

This blog post shares actionable areas and IT cost reduction strategies to mitigate costs and optimize your business process for higher operational efficiency.

8 Areas to Reduce IT Costs

For IT cost reduction, you must focus on understanding and analyzing each layer in the IT value chain. Some specific areas to focus on are mentioned below:

1. Spend

To minimize excess spending, monitor your expenses closely and take quick action to prevent overspending. Identify discrepancies in key IT spending areas such as software, hardware, and labor (both internal and external). Also, monitor operational and capital expenditure variances and your balance of fixed and variable costs to adapt during financial constraints.

2. Applications

Measure the business value of your applications by connecting cost to business drivers such as cost per web visitor, order, etc. Determine the expenses of your top applications, segmented into running costs, development, infrastructure and projects. You can use this information to strategically cut spending on applications with low business value relative to their cost.

3. Labor

Analyze and compare the average monthly staff cost across different applications, regions and roles. Then, you can utilize this data to release temporary or contract staff, postpone hiring or backfilling positions, or move labor to more cost-effective locations. You can also reduce disruption by reallocating internal resources to align with updated application strategies or business plans.

4. Vendors

Minimize expenses by streamlining vendors that offer overlapping business services. Align vendor spending with the strategic importance or business criticality of projects, applications, or business services they support. Ensure accountability across teams with a centralized view of your entire vendor portfolio.

5. Projects

Focus on high-value projects that align with strategic business goals and cancel low-value ones. Optimize resource allocation by identifying projects that can be suspended or restructured for cost savings. Implement agile methodologies to improve efficiency, reduce waste, and increase project success rates, which can lead to cost savings.

6. Business unit consumption

Implement tools that can track and monitor IT resource usage across business units to identify areas of excessive consumption. Educate business units on the cost implications of their IT consumption to encourage cost-conscious behavior. Standardize hardware, software and processes across business units to achieve economies of scale and reduce support costs.

7. Cloud 

Consolidate and inspect all your public cloud expenses across providers like AWS and Azure in a single view. Analyze trends by application, department, and service type (e.g., compute, storage, network). Detect anomalies promptly and take swift action to prevent unexpected charges and maintain budget control.

8. Infrastructure

Assess the factors driving infrastructure costs, including network, compute, storage, and data center assets. Monitor the portion of infrastructure costs dedicated to supporting applications to ensure the infrastructure is appropriately scaled according to evolving application needs. Decommission underutilized assets.

10 IT Cost Reduction Strategies

Keep these strategies in mind to reduce your IT costs:

1. Use cloud-based IT resources

 Cloud computing can minimize equipment and software costs by reducing the need to purchase and maintain them. In fact, 60% of organizations using cloud services reported reduced IT operational costs.

Some of the reasons to adopt cloud-based IT resources include:

• Reduced infrastructure operational costs and eliminated upfront capital expenses such as buying on-prem hardware (servers, networking equipment, storage devices etc.)
• Cloud providers offer cost-effective pricing as most charge on a pay-as-you-go pricing model. You can even scale or down based on current needs to avoid overprovisioning.
• This will eliminate the time and money spent on hardware maintenance, such as monitoring, patching, replacing components, etc.
  

2. Control cloud costs

According to the  2022 State of Cloud Cost Intelligence Report, only 30% of surveyed organizations knew precisely where their cloud budget was going. This means most companies need help allocating cloud costs accurately, as they are not sure who and what drives their cloud costs.

Moreover, 20% of companies are more concerned about the escalating cloud costs. Consider these ways to minimize cloud costs:

• Implement cost-monitoring tools to monitor and analyze cloud spending
• Optimize resource usage by regularly reviewing your instances, databases, and storage to ensure you are not over-provisioning
• Identify and eliminate idle resources by regularly auditing your cloud environment to find and discontinue underutilized resources
• Optimize storage by moving infrequently accessed data to lower-cost storage options and clean up old backups or redundant data
• Review billing regularly to identify any discrepancies or unexpected charges early

3. Identify and delete unused, unsanctioned, and overprovisioned instances

$34 billion is wasted annually on unused licenses in the US and UK. This statement stresses eliminating redundant or unnecessary services and processes to reduce operational costs and improve overall efficiency.

Here is what you can do to identify and eliminate redundancy in all business areas:

• Evaluate current IT systems and processes to identify areas that can be streamlined or eliminated.
• After identification, create an action plan to replace or eliminate redundant instances while ensuring that existing processes and systems are not negatively impacted
• Measure your efforts in terms of cost savings and performance improvements

Some of the few assets you can review and eliminate are:

• Application licenses
• Services and subscriptions
• Infrastructure assets
• IT projects

4. Virtualize in-house servers

Virtualizing servers is an incredible IT cost-reduction strategy. It allows you to run multiple virtual servers on a single physical machine you already own. In fact, IT  companies observe a 40% reduction in hardware and maintenance costs after virtualization.

Virtualizing in-house servers allows you to consolidate multiple workloads into a few physical servers, reducing hardware, power, and cooling costs. It can also enhance flexibility, scalability, and disaster recovery capabilities.

5. Optimize IT processes

Find areas to improve the efficiency and reliability of IT processes within your organization. You can start by streamlining and optimizing processes to enhance productivity and reduce error rates.

Below, we have mentioned a few areas you can improve:

• Incident management: Implement an ITSM tool to track and manage incidents. With the help of AI, you can automatically log and categorize incidents based on predefined rules
• Change management: Standardize a change management process for requesting, evaluating, approving and implementing changes
• Handling common user requests: Deploy a self-service portal where users find answers to common questions, request services, and report issues
• Workflows in the SDLC pipeline: Adopt agile methodologies and DevOps practices to improve collaboration, reduce development cycles, and increase delivery speed.

Rezolve.ai offers an automated enterprise incident management system for handling incidents. It allows teams to identify issues quickly, notify the right people, and fix them promptly. You can also streamline your change management with MS teams and get a centralized location for all change management tasks, such as customizable workflows, automated approvals, and real-time tracking and reporting.

6. Outsource IT services

Outsourcing can save up to 70% of operational expenses in the long run. That is why it is a popular approach among IT leaders to cut IT labor costs while boosting productivity.

Many digital businesses outsource their digitization services because the charges are directly related to deliverables. Some of the most common outsourcing activities include:

• Help desk duties
• Network management
• Software development
• Infrastructure maintenance
• Cybersecurity management

7. Use BYOD- Bring Your Own Device

Bring-Your-Own-Device (BYOD Protocol) allows employees to use personal devices for professional work. Around 82% of organizations currently use BYOD, with 68% agreeing that it has improved productivity, greater employee satisfaction(53%), and reduced cost (45%).

By including the BYOD policy in your organization, you can:

• Remove the need to purchase and maintain a large inventory of company-owned devices 
• Make employees responsible for their work devices, leading to reduced device management costs
• Lower maintenance costs as the burden of device repairs falls on the owners 

8. Standardize your IT

Standardizing IT services can reduce costs and improve efficiency while enhancing service quality. Here are some areas you can standardize:

• Hardware such as desktops, laptops, and servers for easy procurement that can lead to better scalability and compatibility
• OSes and software for more straightforward deployment, patch management, and user support
• IT policies such as data backups, password management, and cloud security to boost consistency across the organization
• Configurations such as network protocols, IP addressing schemes, naming conventions etc., to simplify management and troubleshooting
• Documentation and knowledge platform to minimize the time and effort required for information sharing and onboarding new team members

9. Use open-source software

Open source software is popular because it is easily accessible to all. Ask your team to use open-source software whenever possible to eliminate the upfront costs of acquiring software and annual upkeep expenses.

Apart from costs savings, using an open source software can help you in many other ways:

• Open-source software has integration capabilities with other tools and systems, providing greater flexibility
• May open-source projects have large, active communities to offer support and share knowledge
• Open-source software is reliable and robust as it goes through rigorous testing and performance tuning by a diverse set of users and developers

10. Use automation

Over the last decade, business adoption of automation has leaped from 16% to over 51%, demonstrating a swift shift towards automation. Another striking point is that companies can minimize operating costs by up to 90% through automation.

These trends signify the growing reliance on automation technologies, eliminating the need for manual labor and cost savings.

Some other reasons automation is great for your business include:

• Enables your team to accomplish tasks rapidly with fewer resources
• Allows team to commit to more valuable activities, eliminating the need to focus on mundane, repetitive tasks
• Eliminates bottlenecks, reduces dependencies on specific employees and ensures efficient execution of tasks
• Minimizes manual errors that could lead to costly mistakes or rework

With Rezolve.ai’s hundreds of out-of-the-box automations, businesses can streamline their workflows seamlessly. It also features a no-code studio with 150+ enterprise app integrations, an MS Teams service desk for workflow orchestration, and more. It empowers businesses to run PowerShell scripts (Desktop automation) for added automation, providing flexibility in automating tasks.

Reduce IT Costs with Rezolve.ai 

Implementing IT cost reduction strategies has its challenges. However, with Rezolve.ai, you can manage and reduce your IT costs considerably. It offers a simple subscription fee that includes premium support, quick implementation, and automation, which can result in demonstrable ROI. Moreover, with Generative AI, you can save costs in various areas such as service desk, ITSM, and data analysis, accelerating operational efficiency.

Try it out now!

Frequently Asked Questions

What is IT cost reduction?

IT cost reduction is implementing strategies and practices to decrease expenses related to an organization’s IT operations without compromising service quality or performance.

List the top three benefits of IT cost reduction

The top three benefits  of IT cost reduction include:

• Increased financial flexibility
• Enhanced operational efficiency
• Improved profit margins

What is the IT cost reduction framework?

IT cost reduction framework offers a structured approach to identifying, evaluating, and implementing cost-saving measures within an organization’s IT department. The key idea is to ensure that cost-reduction efforts are systematic, sustainable, and aligned with business goals.