You can't run an efficient business without technology, but that doesn't mean you have to spend over the odds. Follow these five basic steps to make sure you're not paying out more than you have to for your IT infrastructure.
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1. Check all the company credit cards
An oft-remarked on phenomenon in modern business is stealth IT: individual departments acquiring their own technology services by paying for cloud-based options on their credit card, rather than working with internal IT departments, which are often perceived as slow and inflexible. When the cost of a service is under $100 a month, those expenses will often pass unquestioned.
If a business division has felt the need to do this, then it does identify a problem area for IT: clearly this is a service which some staff members feel would be useful. However, that doesn't mean that it's necessarily the cheapest way to go about it. If you have five different departments all paying separately for the same service, chances are you're missing out on the potential for bulk licensing discounts. If they're paying for competing versions of the same platform, there will also be big inefficiencies in training and support.
2. Update ageing hardware
If you're still using a Vista PC or a 10-year-old backup system, the chances are you're doing yourself an economic disservice. The older your hardware gets, the slower it is, the more likely it is to develop faults, and the less likely it is to run modern software efficiently, if at all. Older hardware is also often less energy-efficient, which will drive up your power bills.
That doesn't mean you need to buy new gear every single year — the typical three-year refresh cycle is still ample for many business needs. The shift towards browser-based software means that for many business tasks, there's an excess of processing power available on modern PCs. But don't make the mistake of thinking "it's still working, so I can keep it forever". As we learned last year when Windows XP support ended, trying to keep old machines running forever can be fearfully expensive.
3. Run an audit on software licences
In businesses with a high staff turnover or where growth is rapid, chances are that you may be paying for licences you're not using. Conduct an audit and work out whether you're actually making use of all that software.
That's equally relevant even if you've shifted away from typical on-premises software to using software-as-a-service, which typically charges on a per-user, per-month basis. Because the licensing costs can appear relatively low, they're not necessarily as obvious — but those costs can still mount up. It's especially risky if you've committed to a long-term contract where you pay by the month but sign up by the year.
4. Calculate total implementation costs, not just running costs
A related and important note: when assessing the costs of a technology project, be sure to include the actual setup costs (including a reasonable estimate for staff labour) as well as the ongoing operating costs.
As we've noted recently, cloud computing can be deceptive in this regard: as well as the monthly operating costs, you need to consider the migration costs of moving from an existing platform. That's not to suggest you can't save money by making such a shift — just make sure you're comparing like with like. For a typical cloud project, setup can be 30 to 40 per cent of the total expenditure.
5. Keep a sense of perspective
While IT expenditures can seem high, they're only one part of the equation. Unless you're running a technology-centric business such as a software development house, chances are you are spending far more on labour and rent than you are on technology.
We highlighted this last year when we looked at how the Commonwealth Bank spends money on IT. CommBank's annual IT bill in 2013-2014 was $1.38 billion — a massive amount by any standards. However, its total operating expenses were $9.5 billion, so while cost management for IT was an important part of the equation, it wasn't the dominant story.
You also need to remember that IT delivers benefits as well as cutting expenses. Do you really want to go back to doing your books by hand? There's nearly always scope to spend your money more efficiently, but that doesn't mean you'll ever do away with IT altogether.
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