10 Rules to Reduce IT Spending  

10 Rules to Reduce IT Spending  


According to Gartner, global IT spending is projected to reach nearly $4 trillion in 2020 alone. This illustrates the importance of IT infrastructure and services for organizations. This makes it difficult for CIOs to plan and execute IT cost saving strategies in ways that least impact the long-term health of their business. It becomes very important for CIOs to have a comprehensive understanding of all IT items in balance sheet and profit/loss statement. 

Let’s take a look at 10 rules that help CIOs to rapidly reduce IT spending. 

1. Target immediate impact 

Cutting or lessening items which will lead to an immediate impact is the first step. These items include monthly or quarterly costs for subscriptions or licenses.

2. Reduce, don’t freeze 

It is a good idea to ignore costs that reappear after a certain period of time. Instead, the focus should be on costs that can be reduced or eliminated altogether such as membership and subscription costs. 

3. Cash is king 

Items which have a real cash impact on the P/L statement should be targeted. For example, it is a good idea to target cloud saving in Iaas or Saas instead of reducing hardware assets. 

4. Target unspent and uncommitted expenses 

The greatest impact will be from unspent and uncommitted expenses unless prepayments can be returned, or payments can be recovered. It is a good practice to ensure that contracts are evaluated for termination or renegotiation clauses. 

5. Address Opex and Capex costs 

According to Gartner’s IT Key Metrics Data, 25% of the average IT budget is spent on capital. So besides reducing the opex costs, capex cost reduction is helpful too. 

6. Plan to do it once 

It is better to go with a deeper cost cutting in one go instead of having to cut costs multiple times. 

7. Sunk costs are irrelevant 

When considering a rapid cost reduction, sunk costs are irrelevant. However, there should be a look over the cost benefit or value of stopping such payments. 

8. Address discretionary and non-discretionary costs 

In addition to cutting discretionary spending, CIOs should also look at ways to reduce usage, consumption levels and service levels of non-discretionary costs such as infrastructure.

9. Tackle fixed and variable cost 

Fixed cost reduction is often ignored by organizations in the rush to reduce the easier and more apparent variable costs such as communication, contract labour. Fixed costs such as rent or payroll should also be eliminated where possible and ideal. 

10. Inspect Accounts 

Obtain a complete view of the expense and balance sheet accounts by teaming up with your finance partner. This will help in identifying where immediate reductions can be made in capex and opex costs.