7 Ways You Could Be Overspending on IT (And Action Items For How to Reduce IT Costs)

No one wants to pay more for IT than what you really need to, but unfortunately, costs have a way of creeping up if you’re not effectively managing all aspects of IT.

At the same time, business leaders are more than willing to spend money on IT if they know they'll get a return on their investment. But how do you know if you're overspending or if you're investing more in the right areas to get better results?

Where to Look For IT Overspending

How do IT costs creep up? Often it’s because no one is keeping track of IT assets or there is a misallocation of labor. Or, if you have a cyber attack, what you’ll see is not a creep, but a significant, unexpected increase in IT costs.

Through consulting with hundreds of Southern California small and middle-sized businesses, we’ve found that there are seven main hot spots for IT overspending:

1. Data Storage
2. Unused or Duplicate Software Licensing and Subscriptions
3. User and Device Management
4. Internet Service and Bandwidth
5. Misallocation of IT Labor
6. Cyber Security Incidents
7. Technology Distracts From Your Business Focus

Let’s take a look at these and see if you can spot any of the ways that IT costs creep up in your organization so you can take back control.

1. Data Storage

Whether you’re using cloud storage, onsite servers, or both, data can multiply.

Before you know it, you're pouring more resources into storage than you want or need. Not only are there costs for the data storage itself, but it’s also time-consuming to manage data. And when the amount of data you store swells, so do your costs for data backup.

ACTION ITEM: Audit your data storage and remove unneeded files. 

Before this exercise, it’s a good idea to set guidelines for what data should be backed up and how long different types of information should be kept. Prioritize data for backup according to business operations to find opportunities for cost savings.

2. Unused or Duplicate Software Licensing and Subscriptions

If you don’t keep accurate records on your software, you could be paying for duplicate accounts, or you could be paying for licenses and subscriptions that aren’t being used. This can happen when an employee leaves or changes roles in your organization.

ACTION ITEM: Audit your software to determine if every license and subscription is used and keep your records current.

A good follow-up activity to the audit would be to reassess whether employees have the right software or if there’s something else that would be better suited to their needs. Also, verify if they use the software they currently have.

3. User and Device Management

As employees come and go or change positions within your company, it’s essential to keep track of their software, corporate accounts, computers, mobile devices, and other equipment that they’ve been assigned.

For example, older laptops or mobile devices could still be usable, and there could be email accounts you’re paying for that you don’t need anymore.

It’s common practice for many companies to keep a mailbox open after an employee leaves to make sure that important communications aren’t missed. What often happens is that the email gets forgotten, and pretty soon, six months have gone by and you’re still paying $25 a month for the mailbox when you could have been using an alternative method that wouldn’t have extended your IT costs.

ACTION ITEM: Update documentation regarding corporate accounts, computers, and equipment assigned to each employee. Delete unused accounts. Look through your computer “graveyard” for usable equipment.

4. Internet Service and Bandwidth

It doesn’t occur to many companies to shop around for their internet service. It's another payment that often gets auto-renewed without review. It’s very possible that there’s another provider who could give you a better deal, or that you could renegotiate your plan with your current provider.

Costs creep up with your internet service when you get into a pattern of adding bandwidth whenever you think your connection is lagging. What might be happening is that bandwidth is getting used by everything from employee cell phones to connected equipment, and what you really need is a better way to manage your network and all of its connections.

Another thing to consider is how your internet needs may have changed in recent years. Is everyone still working from the office or do you have more remote workers? How are those workers connecting? It's possible that you need less internet bandwidth at your physical location (or maybe you need more) depending on if you have cloud or onsite servers.

ACTION ITEM: Get visibility on everything connected to your network and audit what's connected. Review acceptable internet use policies with employees. Get a gauge on how your remote workforce has changed your internet needs to get the appropriate bandwidth for your current business needs.

5. Misallocation of IT Labor

Everything that's "technology" isn't necessarily an IT responsibility.

You may have a misallocation of labor if IT labor is being used for non-IT tasks, if you have a high level of capability dealing with low-level issues, or if you have someone managing IT and helping users who isn't qualified to do so.

For example, if you need reports created from your line-of-business software, that’s a job better suited for a business analyst than your IT team. Likewise, asking a business analyst (or anyone else whose primary role is not IT) to solve IT issues will not be an effective use of people resources.

ACTION ITEM: Determine if the person overseeing IT is being steered away from their primary role. Re-evaluate internal IT support responsibilities. Explore if managed IT services could be a better way to resource some of your IT and cyber security functions.

6. Cyber Security Incidents

When it comes to security, investing in defense and preparedness is a much better use of resources than funding a cyber incident response.

Cyber attacks not only cause big, unexpected IT bills, but there are also many other short- and long-term negative impacts. 

Data breaches can take days (or months) to stop the intrusion, clean up the mess, and get you back up and running again. The financial impact will add up as you pay for extra IT support, legal fees, lost business, and hindered productivity.

If the attack happened because you were using out-of-date hardware and software, then your bill could include replacement costs and you’ll have to beef up your security.

The loss of reputation and trust from customers, employees, and vendors can have repercussions on the future of your business as well.

ACTION ITEM: Get a cyber security assessment to determine if you have security gaps exposing you to more cyber risk than you want or need. Ensure that you have an incident response plan included in your cyber security strategy.

Also, talk to your insurance provider about cyber liability insurance. It's highly recommended for all businesses that rely on technology.

7. Technology Distracts From Your Business Focus

When IT isn’t managed effectively, it can become noisy. 

Noisy IT distracts and frustrates your people. Businesses that find themselves in this situation tend to spend more time and money trying to make their technology work for them, sometimes at the expense of their customers.

If your business runs on technology (these days, it probably does) and technology is a sore spot, then it’s easy for your focus to shift from essential business duties towards your IT issues. When this happens, you could be experiencing untold opportunity costs because your competitiveness is compromised.

ACTION ITEM: Re-evaluate your current business focus. Determine whether your time and resources are allocated to the right areas of your business. If you're unsure about your IT situation, reach out to a managed IT services provider to help determine the best course of action.

Our goal is quiet IT, where things run as they should, improvements are made along the way, and your business goals stay as your focus instead of IT issues and distractions.

Assessing the Value of Technology at Your Southern California Business

After you’ve completed the audits and actions suggested here, you should have much better visibility as to where your IT dollars are going. However, the question remains – Are you getting the value you need from IT?

If you find yourself unsure about your next steps or still have further questions after doing the action items listed above, we’re here to help. Reach out to us anytime. We'd be glad to help you determine the right technology budget for your business needs.