A Cost-Cutting Conversation Worth Having
In lean and mean times, small and midsize businesses often cut capital expenditures and discretionary operating expenses. Many companies defer hiring and limit their investments to those with short payback periods and a high return on investment. That is not surprising. These are natural reactions to economic uncertainty.
Information technology (IT) is certainly not immune to budget cuts in a slow economy. In most small and midsize companies, IT represents a big chunk of the operating budget-and a big opportunity for cost cutting. In fact, the question is no longer, whether IT expenses can Cyber Security be trimmed. In a recessionary environment, the real questions are how much of a company’s IT budget is fat, how much is muscle, and how can you tell them apart?
For most companies, these questions have never been more important. The fact is that today, IT plays a key role in the success or failure of a business. An organization’s IT infrastructure has become an essential component for doing business in a connected world where customer expectations and competitive threats are growing continually.
Companies must therefore be careful not to make the wrong cuts in the wrong areas. For instance, if your network were to go down, how long would your business survive? How long could you afford to be without e-mail access? How would your business be affected if you couldn’t send out orders or proposals for a few days? And what would be the impact of losing all your business data for the past five years?
Fortunately, there is plenty of room for cutting IT costs without risking your business or your ability to serve customers. The secret lies in knowing where the fat resides-and in knowing how to trim that excess without affecting the meat and bone needed to maintain healthy business operations and develop a competitive advantage.
Based on our 17 years of experience working with small and midsize companies on their IT infrastructure, this report provides practical tips and objective recommendations to aid businesses in their cost-cutting effort during an economic downturn.
Where Do You Start?
There is no such thing as a foolproof template for IT cost reduction. Every company has different business objectives, competitive challenges, cost profiles, business models and IT requirements. However, when embarking on a strategic cost-cutting journey, it is helpful to break down IT into three main buckets:
Existing hardware and software
Existing vendor agreements
Current IT staff or outsourced IT services provider
#1 -Maximize the Value of Your Hardware and Software
As tempting as it may be to forgo new hardware purchases and software upgrades during lean times, in many cases it actually makes better economic sense to move forward with a technology refresh-even in a recession. Because most hardware carries only a three-year warranty from the manufacturer, a policy of if it ain’t broke, don’t fix it. will often drive up a machine’s total cost of ownership (TCO) to a level far higher than if the hardware was replaced more frequently.
When carefully planned and executed, a shorter hardware replacement cycle keeps maintenance and warranty costs at a minimum by letting the manufacturer bear the costs of keeping your machines running. For instance, with a three-year warranty, your initial purchase price (IPP) on a laptop computer is your TCO. However, after three years, the warranty expires and your TCO starts to climb as the risk of service outages increases and maintenance costs are no longer covered by the manufacturer. As a result, years four and five add incrementally much more to TCO than did the first three years.