10 Smart Ways to Cut IT Costs During a Recession

Updated: April 30, 2009

There remains little doubt that the U. S. economy is heading into a downturn. Companies are laying off tens of thousands of workers, oil prices are rising, the housing market is in the doldrums and Wall Street is running scared. It's only a matter of time before the budget axe falls on IT, so your department should begin preparing for the inevitable.

No one likes budget cuts, but the pain can be reduced by smart planning and execution. Here are some ways that you can trim costs without gutting the IT department.

1. Target budget cuts. In years past, executives have often issued edicts to make across-the-board budget cuts in every department. The notion that this is "fair" is coming under attack as some departments, including IT, argue that they are already running lean machines. Also, management is beginning to see IT as a revenue-generating and cost-reducing department, not just another cost center.

Nonetheless, your IT department will probably be told to make some cuts. If you prepare a budget that accounts for a probable downturn in business, you can steer the cuts to areas that may still have some fat in them and keep budgets for mission-critical projects intact.

2. Postpone upgrades. Put off unnecessary upgrades. If your company has been in the habit of upgrading to the latest version of an OS the moment it comes out, think again. Do workers really need its new features? Will upgrading solve some nagging glitches, reduce calls to the help desk or otherwise save money? If not, you should be able to get along with what you have for now. Remember: Upgrading an OS often requires hardware upgrades, too. There are also indirect costs, such as training end users and administrative overhead.

The same goes for productivity software, such as Microsoft Office. Is the current version working for end users? Are there any genuine productivity savings that can be realized by upgrading? Factor in the cost of retraining employees and supporting the new features, and you may find that it's better to postpone that upgrade.

3. Buy next-in-class hardware. Don't buy top-of-the-line hardware unless you have to. The last few points of performance are the most expensive. It is usually more cost-effective to buy one or two tiers below the top of the line; that way, the business gets a performance improvement without breaking the bank.

4. Virtualize everything. Consolidate servers. Most companies are already virtualizing and consolidating multiple servers onto one physical platform. This is one area where it does not pay to postpone purchasing software such as VMware or Microsoft Virtual Server. The savings go beyond hardware to include power and cooling costs, management overhead, and maintenance.

Application virtualization using technologies such as Microsoft's SoftGrid can reduce the administrative costs of installing, maintaining and troubleshooting software. It's much cheaper to handle a single application installation on a server than to send IT staffers around the building to deal with multiple installations on different machines.

5. Implement thin-client computing. Like application virtualization, thin-client computing keeps applications on a server where they are easy to install, maintain and troubleshoot. But thin-client computing also saves on hardware costs by enabling desktop machines to essentially act as input/output devices. You can get by on cheaper, diskless client hardware or reuse older, less capable PCs.

6. Postpone nonessential projects. Buying hardware and software for a new branch office is not a purchase that you can postpone. But rolling out a new mobile-computing initiative probably is not critical to the company's success. PDAs, smartphones and wireless networks are candidates for deferred spending too, unless it can be shown that they will save the company hard dollars.

Careful cost/benefit analyses are vital during times of lean budgets. Every purchase should be scrutinized to determine how it will increase productivity and reduce costs.

7. Look for open-source options. Open-source software is available free of charge for many technical and end-user applications. Open-source software often requires greater in-house technical expertise to install and manage, but if you have such knowledge on staff, you may as well put it to use. Ask your staff members what they know about open-source software; you may be surprised to learn what they've been playing with in their spare time.

Commercially supported, open-source software is also available. You can save a bundle on licensing fees by using free, open-source software and paying only for installation, maintenance and support.

8. Seek new training options. Training your IT staff is critical : It relieves stress caused by not knowing what to do, and it improves retention by offering career-development pathways. You should not cut training, but only the cost of providing it. Instead of expensive travel to off-site training sessions, look for on-site and computer-based training opportunities.

9. Replace WAN links with VPN connections . Dedicated WAN links between remote offices are expensive. Consider switching to broadband Internet connections at each site and use VPN (virtual private network) software to initiate secure links to headquarters only when necessary. You can save thousands in monthly fees in this manner.

10. Outsource selected services. Outsourcing routine tasks such as Web-server and email management is a way to free up staff time for more important initiatives. Think of outsourcing not as a way to reduce head count but as a way to do more with the staff you have.

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