Finding ways to reduce costs and optimize spending is not new for chief information officers (CIOs); however, this year has significantly altered the way many businesses view their budgets and how they will approach spending going into the new year. In fact, 87% of finance leaders reported feeling very concerned about their business, according to a recent poll by PwC, with the majority preparing to cut costs next year. While many have reduced staff, still others are looking at outsourced IT as a way to trim the fat.
Get lean and eliminate unnecessary expenses
CIOs can look at legacy business applications used by a handful of workers as potential opportunities for cost reduction. Are you paying for maintenance on software or hardware that the organization no longer uses? We often see licensures that are empty expenditures, particularly if the organization experienced a downsize. There also may be redundancies in contractors or unnecessary contract complexities that could add significant costs to the operations budget. When was the last time you did a contractor or outsourced vendor billing audit?
For cloud services, consider using automation to conduct usage audits to ensure your compute workloads and storage are efficient. Identify any pay-as-you-go containers and consider eliminating those that haven’t been utilized in 90 days. Consider shutting down developer sandboxes or other innovation environments that are draining income.
Ultimately, this first step toward outsourced IT reductions should seek to ensure that you’re only paying for what you need and what you use.
SaaS (Software-as-a-Service) vendors likely play a big role in your sourcing strategies. With an eye on 2021, it’s time to analyze spending in relation to these long-term partnerships. Are you using all of the seats you’re paying for? Is your contracts management process seeking opportunities to capture early renewal benefits?
Talk with your outsourcing vendors about how they can help you create a more beneficial arrangement between the two organizations. Many times, an increased long-term commitment can yield a substantial cost reduction. You may be able to restructure the entire financial framework to accelerate production and cut costs.
CIO discusses an interesting new concept called “the recession clause.” These are most often leveraged with SaaS vendors who agree to cut subscription fees for clients that experience a revenue drop. The point here is, typically, if you don’t ask for this type of redemptive relief, you will not get it.
Leverage automation and reskilling to cut costs
Reducing IT sourcing spend requires more than a review of contracts and billing. Consider how automation could help your organization restructure the workforce in new ways to increase efficiency. Then consider how reskilling your current workforce could help optimize processes and eliminate excess expenses. This is a cross-departmental effort that should be undertaken with the help of every executive and manager in the organization. The goal is to consider how your organization can use technology to restructure, improve, and cut costs.
Determining how workflows can restructure to create a lean organization is inherently part of our efforts to move toward digital transformation.
From a human perspective, there are three primary cost cutting measures to consider:
- Artificial Intelligence (AI) and automation can eliminate some internal redundant tasks. It also can help employees work more efficiently.
- Cross-training or reskilling workers can stretch their expertise further. This redundancy also provides a measure of protection; layoffs are less likely to be crippling to internal workflows.
- Outsourcing is the third leg of this cost-cutting tripod, assuming these contracts are managed carefully and effectively.
The typical enterprise has considerable redundancy not only in tools and outsourcing contractors but also between departments. As corporations grow, they typically evolve into a group of semi-independent workgroups or departments. Many times, the same tasks are repeated across departments, often with a heavy emphasis on middle management that simply isn’t necessary anymore.
The decision to cut IT sourcing costs impacts contracting, billing, workflows, and the human workforce. Sometimes it takes a clear set of eyes to determine how to restructure these areas to create significant improvements that positively impact the bottom line. That’s where the Windsor Group Sourcing Advisory can help your organization. Starting a conversation with our team could lead you toward the operational and fiscal improvements necessary to weather the coming storms.