Updated: Mar 14
Global geopolitical changes after the COVID-19 pandemic created a real mess in the business world. Following Deloitte, inflation is here to stay for at least until 2024. It means that end consumers will save money, and companies should also follow this tendency to cover a new demand and tailor the cost of products and services to the current financial capabilities of their audiences.
In the digital era, investment in IT is always the most significant since each company now works based on software products and makes them its main asset affecting development strategy. Statista predicted that in 2023, IT spending on enterprise software worldwide would grow to $755 bln. Meanwhile, businesses are now thinking of reducing this number and continuing their digital transformation journey as usual.
Critics might say it's impossible, but as practice shows, best-of-breed product usage and development is doable even with a modest budget if companies know how to approach IT savings correctly. Scroll down to explore the top 4 options to help reduce IT costs without stopping your digital transformation processes.
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Why Business Leaders Should Cut IT Budgets in the Next Years
The problem of reasonable investment in IT always takes place. Sometimes, managers think the more they will spend on technology, the more they get in reverse: sky-high ROI, better business performance, and higher sales. Probably this scenario works in some cases, but a high-quality IT strategy requires a reasonable investment. For example, being over budget is just as destructive for software development projects as underestimating. So, businesses should know how much they should spend and what for.
The global crisis makes companies follow this rule with dual power. Most of them have already bought a ticket in one way and started a digital transformation. The only solution here is to continue reducing IT costs. Usually, the last ones include:
spending for current software (subscriptions, maintenance, etc.)
software development project budgets for new initiatives
Without reasonable investment in the next couple of years, businesses risk spending too much money and don't achieve the expected results. It's not the best option in a downtime economy. Therefore business leaders are looking for solutions.
Following Gartner, in May 2022, 39% of CFOs said they would cut costs in Q4 if high inflation persisted. Well, now Q4 is as well as mushrooming inflation, so we should expect real actions to reduce IT budgets. But how to cope with it without harming the entire business? It's time to reveal secrets! Scroll down to explore four options that will help you save costs and drive your digital transformation simultaneously.
Top 4 Ways How to Reduce IT Costs
Focus on modernization of current software
During digital transformation, companies always have several options to get custom software: to design it from scratch or boost the current products. Of course, it depends on particular business demands and existing software functionality. Moreover, sometimes modernization could be even more costly and not worth the effort. But if you are working with proven solutions that can be modernized reasonably - opt for this way instead of developing from scratch. The last one is always about time-consuming processes and significant investment.
Try Rapid Application Development tools and Cloud Computing
What else will help you avoid the entire development cycle when possible?
For software development, opt for rapid application development tools - various no-/low-code platforms capable of helping you design the needed solutions in a fraction of the time. In most cases, it's not compulsory to be an engineer to work with them and develop products with linear functionality.
Choose various ready-to-use cloud computing solutions (SaaS, IaaS, etc.) to cover issues without development. Now cloud computing is on edge. Following McKinsey, investment in this sector as of 2021 was $136 billion. How can they help?
They can cover all issues usual for your industry
Businesses don't need to take care of additional software and hardware to make such products work
Cloud computing solutions are convenient with their subscription plans, so you can always change the vendor or choose the other plan
Companies get managed hosting and complete maintenance on the vendor's side
Does it cut costs? Absolutely. Does it help you to continue your transformation journey - and how! Make sure your business conditions and requirements match the functionality cloud computing software provides.
Keep an eye on subscription plans
Following Chiefmartec's 2022 SaaS Trends Report, companies with < 100 employees use about 102 SaaS tools, businesses with 101-1000 employees - 185 SaaS products, and enterprises with over 1000 employees - 288 SaaS instruments. Are all of these tools used daily? No. Actually, business leaders forget about most of those subscriptions providing vendors with a stable income.
Start the global budget cut with small steps, and review the number of subscriptions and intensity of application usage. Eliminate products that your employees don't or barely use. Find more functional solutions to reduce quantity but maintain quality.
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Set an IT budget for unexpected cases
IT products operation is usually as dynamic as the current situation around. Of course, businesses strive to make their work more predictable: define a time for repair, prevent the risk of downtime, etc. However, sometimes even IoT systems shadowing this process can fail. So, you should have a reserve budget covering unforeseen IT expenses. It allows businesses to be more flexible and implement development strategies without concerns. This way, you always have a backup plan.
The Bottom Line
Cutting IT costs to operate with or design robust software is not a piece of cake. Usually, it's not a job for one since it requires a professional approach from the business, financial and IT sides. In this case, you first need to dive into your company's conditions and define what IT products and processes require money. Invest to cover the most urgent issues. Save the core functionality of IT solutions you're used to. Follow the above four rules to kill two birds with one stone: spend less and achieve more.
If you're looking for a way to modernize software in a fraction of the cost and time - contact our sales team. We will advise you on the most reasonable option suitable for your business.