3 Proven Approaches for Cost Optimization in IT
Published: 2021-03-26 10:37:18

The smartest post-pandemic business ecosystems are striving to adopt a flexible IT infrastructure that enables the new workplace practices such as work from home and remote work. Central to this new reality as well as surviving in a permanently-changed world is cost savings or cost reduction in connectivity and operations, which is a perennial concern of large organizations across the board.

Today, technology and IT infrastructure play a crucial role in all business processes and ensuring business continuity. Their ROI cannot always be assessed, leaving finance departments wondering how they can optimize their IT budgets.

Gartner defines cost optimization as “a business-focused, continuous discipline to drive spending and cost reduction, while maximizing business value.” In terms of IT, this includes:

* Obtaining hardware and software at the best prices
* Standardizing and simplifying all platforms, applications, and workloads
* Digitizing and automating all operations

![alt text](https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/McKinsey%20Digital/Our%20Insights/Reducing%20data%20costs%20without%20jeopardizing%20growth/SVG-Reducing-data-costs-Exhibit-1.svgz "Reducing data costs without jeopardizing growth")

*Source: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/reducing-data-costs-without-jeopardizing-growth*


##1. Don’t Throw Good Money After Bad

When [getting started with IT cost optimization](https://www.nutanix.com/theforecastbynutanix/business/7-best-practices-for-it-cost-optimization), you need to be careful about not sabotaging your business capabilities. The best way is to run an audit on each of the IT ecosystems in the organization, including on-premises data centers, public cloud services such as SaaS, IaaS, and PaaS, as well as self-hosted private cloud solutions. In the enterprise, these systems incur additional operational expenditure (OPEX) for administration, maintenance, utilities, and real estate space.

You need to evaluate these systems on the basis of two criteria: How quickly they deliver ROI and where they fit into your business priorities. The idea behind using both of these parameters is to find solutions that deliver the right results instead of judging them on a low to high price/value scale.

After modeling your cost allocation based on each system’s contribution to business goals, you can rationalize whether each spend is “good” or “bad.” The bad spend could be money thrown at purchasing data (such as industry insights or consumer databases) that are never turned into insights, underutilized server or cloud resources, solutions (experimental, pilot, or deployed) that don’t integrate well with the rest of the infrastructure, or even content created for your website or digital marketing campaigns that is never published anywhere.

You need to think about how to make each of these resources deliver a positive ROI or get rid of them as soon as possible. Regardless of your budget or the state of your infrastructure spend, your focus should be on [continuous delivery and continuous deployment](https://blog.newrelic.com/engineering/continuous-delivery-continuous-deployment-continuous-integration/) at all times.

##2. Consolidate Your Infrastructure

Post the COVID-19 pandemic, a lot of organizations have been forced to turn to practices like remote work and BYOD. Both of these are blessings in disguise from the point of view of cost savings.

BYOD, for instance, can reduce costs to the tune of [$3,150 per employee](https://blogs.cisco.com/news/new-analysis-comprehensive-byod-implementation-increases-productivity-decreases-costs), as per a study by Cisco’s Internet Business Solutions Group. It saves you not only hardware costs, but also money spent on training employees to use the company devices.

Again, remote work saves on power and utility costs as well as telecommunications expenses like broadband and internet connections.

For companies that run humongous data centers, moving to the public cloud can be a cost saving exercise if you need to scale certain workloads very quickly. When you switch to the cloud, your company can phase out legacy hardware and other equipment that is no longer needed. The cloud vendor will have the necessary compute, storage, and network resources to deal with all applications you need, and therefore, you don’t need to bother about the costs of server hardware installation, software upgrades, maintenance of the infrastructure, and support to end users.

The cloud provider will also deal with load balancing, redundancy, backup, and restores. You don’t have to make additional provisions for disaster recovery or have an expert team in place to deal with downtime.

Finally, consider implementing a Hyper Converged Infrastructure – a software-defined infrastructure that combines compute, network, storage, and management into a single unified system, which is abstracted to the end user. HCI can provide the advantages of a cloud environment while letting you use your own hardware.
Granted, investment in HCI has up-front costs, but it greatly reduces the TCO and operational expenditure due to its scalability, operational efficiency, and capacity for faster deployment. Further, it reduces the overall data center footprint, and consequently requires less maintenance.

##3. Manage Vendors and Service Providers Better

Many enterprises hold the belief that it is necessary to go with high-priced vendors and contractors in order to have the best services at all times. While this is largely true, you need to make sure your vendors have specific skills that are needed for each private, public, or hybrid cloud system.

Put in place proper [vendor management strategies](https://www.entrepreneur.com/article/320240) and aim for long term relationships with each of them. At the same time, you want to make sure that you aren’t locked in with any one particular vendor, especially for advanced hardware or cloud technology that powers your mission-critical business operations.

Traditionally, data centers and even private cloud solutions have needed large investments in hardware. Vendors like IBM, Oracle, HP, and Cisco tended to “lock in” enterprise customers into multi-year software and hardware contracts by promising bigger discounts. However, they simply used these contracts to sell more expensive products to their customers.

Today, major cloud providers such as Amazon, Microsoft, and Google are in the same position. It is up to you and your teams to be aware of your exact requirements, the capabilities of your vendor, and viable alternatives to the solutions they provide. Never fail to read the fine print and negotiate entry and exit strategies upfront with each service provider, even if you enjoy a win-win relationship with them at the moment.

##Don’t Choose Cost Cutting Over Growth

Technology is the biggest growth enabler. No company or business leader should let budget cuts affect digital transformation or information-driven opportunities. That said, you should constantly review and improve existing processes and make cost optimization a part of the IT operational culture – choose open source software where sufficient, build a lean, hybrid cloud-based infrastructure, and constantly gather and analyze data from relevant sources, enabling your IT department to deliver real business value consistently.