2014 Budget Season: 3 Must-Dos to Reduce IT Operating Costs

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Reduce IT Operating Costs

As you gear up for the 2014 IT budget season, you know there are many areas competing for IT time and attention.  According to a recent article from CIO.com, you’re also trying to secure the best talent when it comes to areas like application development, project management, and technical support.  At the same time you’re probably facing the annual budget dilemma of how to design your 2014 IT budget for more strategic impact and reduce IT operating costs.  You’re dealing with ‘keeping the lights on’ expenses that are known to eat up nearly 70% of your budget year after year.  If you want to make a real impact to this recurring problem, you need to entertain a structural change to how you organize and prioritize your IT organization.

Worldwide IT spending is projected to total $3.875 trillion in 2014, a 4 percent increase from 2013 according to the latest forecast by Gartner.  Since IT infrastructure and operations account for 55% of the IT budget, leaders are constantly evaluating ways to reduce IT operating costs, improve efficiencies, and impact their bottom line.  In 2013, cost reduction was the 2nd highest CIO priority and this will continue to be a priority. [Gartner]

In this blog we’ll cover 3 must-dos to reduce your IT operating costs in the next year and change the game in your IT organization:

1) Evaluate your IT infrastructure
2) Review staffing and resource allocation
3) Change your ratios from operational to strategic

#1 – Evaluate Your IT Infrastructure

According to a recent Gartner webinar, when it comes to IT infrastructure and operations spending, the data center and the network make up a majority of costs (1/2 of network expenses to carriers and providers).  IT Executives need to analyze and manage their providers, services, and contracts for both wireline and mobility to ensure their contracts are in line with current market rates.  Redesigning and implementing new technologies such as MPLS, colocation, mobility management, and advanced voice services such as SIP are good ways to realize cost reduction over time.

In addition, recognize that with the evolution of third party expertise and economics, many areas that were once thought of as necessary to keep in house are now handled by others at lower costs.  This results in better outcomes so you can grow the strategic areas and focus great IT talent on the things that really matter – which leads to #2.

#2 – Review Staffing and Resource Allocation

Are you using valuable IT resources and highly skilled labor to manage tactical elements like communications infrastructure or telecom?  This is a critical problem for IT organizations.  If you have highly skilled resources taking helpdesk calls for mobility, they are not being utilized for more strategic IT initiatives.  According to the same Gartner study, infrastructure and operations make up about 50 percent of IT staff. Typically most of the staff is involved in day to day projects.  Consider restructuring highly skilled labor to your strategic areas of focus.

#3 – Change Your Ratios from Operational to Strategic

Out-tasking the management of tactical areas will change your ratios.  Permanently.  Instead of having operational costs (carrier or employee) inflate, you will now enjoy perpetual savings – there will be a governor on the need to hire incremental FTEs to manage the enterprise growth of tactical areas

Talking with business leaders and the CEO about leveraging new technologies and applications to increase sales force efficiency, better serve current customers, and completely differentiate from your competition is a far more exciting conversation than:  “Costs to keep the lights on consume over 2/3rd of my budget so don’t expect too much innovation from IT this year.”

The Summary

If you’re dealing with the same old budget dilemmas and needing to reduce IT operating costs, get innovative.  Change the status quo.  Evaluate your infrastructure, review staffing and change the ratios.  Now the discussion with the CFO becomes: “I have 5% more dollars to devote to key strategic IT initiatives that will differentiate our company relative to our competitors, AND here is how I plan to spend them to make us more strategic”.


Renodis is the only firm in America providing professional management of businesses communications infrastructure. As a pioneer in its field, Renodis is committed to providing objective service that empowers clients to reduce the Total Cost of Telecom™, free up valuable IT and Executive resources, future-proof their technology, and gain more time for core business initiatives. Contact us to learn more.

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