Today’s competitive business environment places pressure on margins. IT leaders face pressure from the C-suite to cut costs. But cost-cutting often degrades performance and quality, leading to customer dissatisfaction.
The solution lies in cost optimisation.
Cost optimisation maximises the value of IT spending. It utilises available resources to achieve the best outcome at the lowest price point. Here is how IT leaders can attain cost optimisation without compromising performance or quality.
1. Consolidate the infrastructure
As the first step towards optimising costs, assess the IT infrastructure.
Identify waste and inefficiencies and take remedial actions.
Consolidate the infrastructure. Consolidation reduces energy consumption, maintenance costs, and physical space requirements.
Check actual usage needs vis-à-vis available resources. Scale resources to the most efficient size for the use case. Optimise servers based on RAM, database, CPU, graphic performance, storage, and network throughput.
Implement hyper-converged infrastructure (HCI). HCI minimises the resources needed to maintain computing, network and storage systems. HCI implementation entails sizable up-front costs, but it reduces maintenance and support expenses. It also brings scalability, data efficiency, and speed to the mix. The investment pays back for itself quickly through improved performance.
2. Choose the right technology
Most enterprises are in the throes of digital transformation. They try to standardise, simplify, and rationalise processes and applications to optimise ROI. But the digital transformation must be well thought out to achieve the intended ROI.
Conduct a thorough evaluation of all viable technology options. Consider performance, security, cost, scalability, and other relevant factors.
Make a cost-benefit analysis before the upgrade. Legacy systems often bleed revenue due to their inefficiency and high energy consumption. Upgradations reduce operational expenses and payback for the investment in a short while. But sometimes, running legacy hardware or applications makes financial sense. The upgrade may incur more costs and disruptions than it is worth.
Explore open-source technologies (OSS). OSS are often less expensive than proprietary technologies and more customisable. But it is not always a magic bullet for all situations. Scrutinise the open-source technologies with the same evaluation done for proprietary solutions.
3. Get cloud migration right
Cloud migration has become a no-brainer for enterprises considering the benefits on offer. Today, about 90% of all enterprises use some cloud service. The cloud:
- Make the infrastructure agile and convergent. The business can pick and choose resources rather than paying for the entire stack.
- Eliminate complexities and simplify software management and upgrades.
- Unify diverse systems to centralise control and administration.
- Reduce hardware and software licensing expenses while improving system performance. Cloud resources do not have a shelf life, like on-premises systems.
But the cloud is not a magic wand. A whopping third of total cloud spending goes to waste. To avoid such waste,
Provision resources in line with workload needs. Many project managers over-provision resources just in case. Such over-provisioning leads to the underutilisation of assets and a poor asset utilisation ratio. It ties up cash and attracts opportunity costs.
Avoid lift-and-shift when migrating to the cloud. Most enterprises assume their on-premise infrastructure is optimal. They transition to the cloud without changing anything. An AWS study estimates only 16% of enterprises have appropriate OS instances provisioned for their workloads. The rest 84% of OS ran on larger-than-required footprints. A lift-and-shift approach translates legacy inefficiencies to the cloud. Rightsizing the infrastructure before migration can cut costs by 36%.
Refactor apps to a cloud-native design. Or use other incremental cloud migration strategies to optimise costs over time.
Review licences. Many enterprises pay for software licences they do not use or pay for the premium full-feature licence when they use only the basic features.
Seek cloud provider discounts that offer greater value than standard plans. For example, AWS Savings Plans and Reserved Instances offer savings of up to 75% compared to regular on-demand pricing.
Automation tools rightsize resources, purchase the correct instances, and identify discounts.
4. Seek value from vendor agreements
Many IT teams make the mistake of trying to get the lowest price when making purchases. Rather, seek optimal value through
- Favourable payment terms,
- Implementation support,
- Seeking On-site training and troubleshooting.
- Side-stepping vendor lock-in. Some vendors offer contracts with a low entry price but have long lock-in periods and high exit costs. The agreement may even restrict engaging the services of a competitor.
Seek simplicity. Often, the licensing fees and the associated terms remain complex. The enterprise pays more than necessary and may end up with below-par products, with degraded performance and low quality.
Estimate the total cost of ownership (TCO) rather than the purchase price. TCO includes upfront costs, ongoing maintenance and support costs, and training costs. Some technologies have a low price but are very expensive when considering TCO.
5. Reduce operational costs
One of the big IT cost guzzlers is operational expenses. Streamlining operations brings about efficiency and enables the enterprise to do more with less.
Implement Information Technology Infrastructure Library (ITIL) best practices. ITIL provides a framework for IT service management and aligns service standards with business needs. It helps organisations improve service quality, reduce costs, and increase efficiency.
Create cost governance policies that guide the team to the right course of action under different situations.
End unused resources. Monitor server load metrics to identify low activity periods. Switch off idle instances during such times to cut costs without degrading customer experience. Also, terminate compute instances when away, such as at weekends or nights. Automate the process to make sure such actions do not degrade performance.
Deploy hybrid support teams. Many enterprises pair application and production support services exclusively with the product groups. Such teams boost service efficiency. But it prevents these resources from contributing to other services and leads to wasteful duplication. Explore hybrid models that consolidate support teams in product groups.
Invest in automation to streamline IT processes and reduce manual intervention. For instance, automated software deployment reduces installation time and effort. The workforce can focus on more critical tasks, increasing productivity and efficiency. Gartner estimates two-thirds of all customer experience projects will use automated chatbots soon. Enterprises with automated customer support save 33% per voice engagement.
6. Promote a cost optimisation mindset
Cost optimisation techniques rarely succeed without a mind-shift charge. Promote a culture that values thrift and continuous improvement. With such a mindset, cost optimisation becomes ingrained into work processes and decision-making.
Treat costs as a metric, the same way as uptime and the Mean Time To Recover (MTTR). Such a culture motivates teams to develop new ways to reduce costs without degrading performance.
Adopt a proactive approach to overcome resistance to change. The inherent risk of disruption triggers resistance to change. Equip the workforce to cope with disruptions and convince them how the change will benefit them.
7. Measure and monitor performance
Cost optimisation only works with definite, quantifiable measurements. Qualitative insights do not convince the C-suite about the success of the cost-cutting initiatives.
Develop metrics to measure the IT systems and processes’ performance. Make sure the identified metrics link to business goals. Standard metrics include uptime, response time, and resolution time. Track these metrics to ensure performance and quality.
Put in place a monitoring solution that provides real-time visibility into IT systems and processes. Real-time monitoring nips performance issues in the bud before it impacts business operations.
Effective cost optimisation aligns service delivery with the best customer experience at the right cost level.
