Cost-cutting conversations worth having
In a lean average time, SMEs often reduce capital investment and unspecified operating costs. Many companies delay hiring and limit their investments to those with a short payback period and a high return on investment. This is not surprising. This is a general reaction to economic uncertainty.
In Information technology, the managed services provider is certainly unaffected by adversity budget cuts. For most small businesses, IT makes up a significant portion of their operational budget and represents an important opportunity to reduce costs. The problem is no longer about reducing IT spending. In a recessionary environment, the real question is how much fat, how much muscle, and how it makes a difference to a company’s IT budget.
For most companies, these questions are more important than ever. The truth is that today information technology plays a major role in the success or failure of a business. Enterprise IT infrastructure has become an integral part of doing business in a connected world where customer expectations and competitive threats are constantly rising.
Therefore, companies need to be careful not to make the wrong cut in the wrong area. For example, how long will your business last if the network goes down? How long can I afford if I can’t access my email? What is the impact on my business if I can’t submit my application or proposal for a few days? And what are the implications of losing all your business data over the last five years?
Fortunately, there is plenty of room to reduce IT costs without compromising the ability to serve businesses and customers. The secret is to know where the fat is. And we know how to get rid of that excess without affecting the body and bones needed to maintain sound business operations and build a competitive advantage.
Where do you start?
There is no reliable IT cost model. Every company has different business goals, competitive challenges, cost profiles, business models, and IT requirements. However, when embarking on a strategic cost-cutting journey, it helps to divide managed services into three main groups:
- Existing hardware and software
- Existing sales contract
- Existing IT staff or outsourced IT and managed services providers
- 1-Maximize the value of hardware and software
Hardware
Lean manufacturing may make you want to refrain from buying new hardware or upgrading software, but in most cases, it makes economic sense to keep your technology up-to-date even in a recession. Most devices only come with a 3-year manufacturer’s warranty and should not be repaired unless they are damaged. This often raises the total cost of ownership (TCO) of the device to a much higher level than if the device were replaced frequently.
Careful planning and execution shorten the tool replacement cycle, allow manufacturers to cover the cost of maintaining and operating the tool, and minimizes maintenance and warranty costs. For example, with a 3-year warranty, the initial purchase price (IPP) of a laptop is the total cost of ownership (TCO). However, after three years, the warranty period expires, the total cost of ownership (TCO) begins to increase, and there is an increased risk that outage and maintenance costs will not be borne by the manufacturer. As a result, in the 4th and 5th years, the TCO will gradually increase in the first 3 years.
Devices
Is the device you just purchased slower than you think? While waiting for the next cycle of technology exchange, there are simple things you can do to increase the efficiency of your existing computers and servers. For example, you should do the following regularly:
- Spring cleaning hard drive
- Perform maintenance tasks (for example, optimized drives)
- Uninstall apps you no longer use
- Performs a virus scan even if you are using antivirus software
These tasks may not seem important, but they can help you significantly improve the efficiency and speed of your device. You can also increase employee productivity, improve customer service, and eliminate the need to purchase new hardware before the next scheduled update.
Another area where companies can make significant improvements in system security. Something as simple as. rock. (Simple action that prevents users from installing software or changing system settings) All computers and laptops are free of malware that can lead to virus outbreaks, security breaches, and reduced productivity. Prevents accidental installation on the user’s device software. In fact, according to analytics firm Gartner, this security measure alone reduces the company’s total cost of ownership on a PC or laptop by 42-45%.
Software and operating system
Just because the software industry is constantly rolling out new upgrades doesn’t mean you have to do the same. It is wise to wait at least 6-18 months before deploying an operating system upgrade or upgrading to an existing software package. Often, there are hidden training costs associated with software upgrades, as well as performance issues that should be considered in terms of both existing hardware and the instability inherent in most new software at release. I have.
Security software
When it comes to keeping your network secure, the best solution for most companies is to outsource their work to a hosted managed services providers. First, the risk of phishing attacks, viruses, and data breaches is higher than ever, and new threats are emerging every day. Secure Computing, an enterprise gateway security company, recently reported that the number of spam messages doubled from 60 billion in 2006 to 120 billion by November 2007. Below is the network. Another reason to outsource this job: security software is as good as the latest patches or upgrades, and dealing with many software options and antidotes is very difficult, expensive, and costly for most companies. This will take some time.
# 2-Maximize the value of existing vendor contracts
Lease and buy
A comprehensive evaluation of existing vendor contracts always allows you to save money without sacrificing quality. For example, in most cases, renting a computer, copier, and software can significantly improve your cash flow.
It’s compelling for companies leasing IT in a recession. First, the shelf life of today’s technology is very limited. However, it is not necessary to absorb this consumption. The leasing company offers a leasing rate of at least 6% and integrates all minor costs associated with the equipment (such as installation services) into the contract.
Leasing allows you to keep renewing your contract and pay a small fixed monthly fee instead of making a large capital investment every three years. The impact on cash flow is enormous. For example, a project to replace equipment and update software can be borrowed for $ 50,000 for a monthly payment of about $ 1,500. This is a more manageable cost in climates where cash flow is important.
Internet/telephone company
Communication costs are often one of the top five costs for small businesses. But the worry is that after the merger of BellSouth and AT & T, bandwidth prices have continued to plummet, while communication costs for most companies have leveled off or increased. First, according to Gartner, businesses typically spend 10% of their communications budget on old services and bugs. In addition, many companies are unaware that they can renegotiate their contracts. And those who don’t know how to do this or find areas of savings opportunities.
Savings in this area are often important if you know where to look. Simply renegotiate your internet/telecom contract and you’ll consistently save more than $ 2000 a month on your business without sacrificing quality. If you’re trying to do it yourself, always use one vendor for both services. This alone usually reduces the overall cost. In addition, as with insurance, we recommend that you continue to reassess your service each year to ensure that you are always doing the best possible transaction.
# 3-Maximize value from IT staff or outsourcing providers
During a recession, it is very important to focus on increasing the efficiency of individuals or groups responsible for the operation and maintenance of IT infrastructure. This is you, another employee, or an external provider.
In-house IT resources
If you are currently using internal resources, it is worth asking. Is this individual responsible only for IT? If not, how much time and effort does this person spend managing and maintaining your IT? If this employee has little responsibility for IT, what other activities can you do to add value to your company and your customers and increase their bottom line? As a part-time, IT professional, does this individual have the expertise to handle all IT needs properly, or does he need to bring in outsiders from time to time?
If you’re considering hiring an IT employee, how do you know that having such resources is a luxury? In the Atlanta metropolitan area, full-time IT employees can easily earn $ 5,000 a month in addition to benefits. You also need to take into account the hidden costs of training to keep the individual’s knowledge base up-to-date in the ever-evolving field. How does this cost compare to outsourcing this job? Also, what are the trade-offs between quality and level of service in various outsourcing options?
Hourly outsourcing service provider
If you pay an external provider on an hourly basis, the problem is: How can these costs be reduced? And do you know when (or when) you’ve gone too far in reducing costs? In other words, how can you increase the value of your watch contract? Duct tape. IT Maintenance and Repair Approach-One way to avoid calling your service provider every hour, which can lead to hardware or software failures. The cost of recovering from such an event can easily reduce the cost of additional service calls if you still have time to completely prevent the problem.
Managed Services Provider (MSP)
Over the last few years, there has been a tendency for SMEs to want the services of large companies at SME prices. It is an IT Management Service Provider (MSP). This model is not for everyone. However, given the cash flow, cost, and risk exposures of the current economic slowdown, more and more companies are finding this approach more economically sensible. Most fixed-price MSP programs offer many more benefits. Related to a recessionary environment. They include:
- The ability to budget a pre-determined annual amount of IT. This avoids budget spikes, spending surprises, and last-minute confusion.
- Systematic preventive maintenance of the entire IT infrastructure and real-time monitoring of network instability or failure
- Large-scale remote enterprise tools with instant access to IT networks and their problems, and regular on-site preventive maintenance by certified network engineers.
- Protect your network from bullets for business continuity and disaster recovery and document your entire network.
Because it doesn’t cost anything. Fire protection. What to do next? Firefighting and MSP practice preventive maintenance. MSP’s cost structure and economies of scale can also give businesses a significant competitive advantage. In addition, they charge a fixed monthly subscription fee puts the burden of keeping IT running efficiently on their shoulders. Companies considering this model need to make sure that the MSP works remotely and is in the field. Equally important is to focus your research on MSPs that are not economically profitable when recommending the purchase of hardware or software. This means they are not sellers.
Conclusion
Record your performance before making a big managed services provider’s decision to find fat. Comprehensive and objective IT evaluation is essential for managed services budgets, avoiding laborious tasks. It evaluates IT based on its unique business goals. No company should make key IT decisions without a careful review of its technology infrastructure, especially in a downturn.
This report provides a starting point for such exercises. At a minimum, you should use the three key areas described in this document to determine where to work and where low-risk cost savings opportunities are available.
An ideal IT assessment should focus on the following key areas of the scorecard:
- IT infrastructure
- Maintenance practices
- protection
- application
- Network security diagnostics
- Documentation of managed services assets for business continuity
- Align information technology with your company’s business goals and strategic plans
- The assessment should lead to a technology roadmap linked to your budget. And this budget
- Current economic conditions, company goals, and
- Purpose
