What is IT Cost Optimization?

What is Cost Optimization in IT?

IT Cost Optimization is the business process that businesses perform to reduce IT costs while increasing IT efficiency. This can be done by optimizing IT infrastructure, implementing a cloud computing strategy, and utilizing more cost-effective technologies such as virtualization and SaaS solutions.

IT cost management is a discipline, not a one-time process. In the IT cost optimization process, IT assets are evaluated according to the IT value they create, then a decision is made to dispose of or replace the IT assets with insufficient efficiency.

Why is IT Cost Optimization Necessary?

Competition in the business sector is increasing day by day. In order not to fall behind in this race, businesses make investments to improve their IT infrastructure. Of course, businesses do not have an unlimited budget. For this reason, they want to use their budgets in the most efficient way. This is where the necessity of IT cost optimization emerges.

Businesses of all sizes want to gain efficiency after an IT spend. So, does each purchase benefit the company? Of course not. Businesses sometimes make wrong purchase decisions without performing the right analysis. If the IT value of the purchased IT assets is not measured, they will continue to pay the license fee regularly every month/year, as they will not be aware of this.

Companies that implement the IT cost management process will periodically evaluate their IT inventories, so they can detect unnecessary applications and get rid of them. Or companies can replace very high-cost assets with less costly counterparts with the same functionality.

How to Optimize IT Costs?

The solution to cost optimization is not to find a magic bullet. Rather, it's about evaluating your current environment and identifying opportunities for savings. This includes reviewing contracts with IT vendors, the current state of your IT infrastructure and its capacity for growth, as well as your security solutions.

Technology investments of enterprises are increasing year by year. But of course, all businesses have limited IT budgets. Businesses need to spend their IT budgets in the most efficient way to achieve their IT goals. Businesses must take a holistic approach to reduce IT costs. In this process, businesses must implement the appropriate ones from IT service management, IT operation management, IT asset management, application portfolio management, software asset management, hardware asset management processes.

Cost optimization is a set of activities and techniques that are designed to identify and eliminate waste in IT systems, processes, and operations. IT Cost Optimization starts with an understanding of what the organization is trying to achieve through its IT investments. The next step is identifying opportunities for cost reduction and implementing those initiatives.

IT cost optimization is often achieved by:

• Reducing overhead costs for hardware, software, and data center expenses.
• Eliminating redundant processes.
• Using more cost-effective technologies like virtualization.
• Implementing a cloud computing strategy.

IT Cost Optimization Best Practises

IT cost optimization is the business process that businesses perform to reduce IT costs while increasing IT efficiency. The goal of IT cost optimization is to create a balance between costs and value. In order to optimize IT costs, you need a framework.

IT cost optimization begins with conducting an analysis of current IT costs. Take inventory of all your systems and what they are used for. It’s good practice to review this list on a quarterly basis and update it as needed.

Next, you should analyze the new projects or changes that are on the horizon, including any initiatives to reduce IT costs. An example would be cloud migration — you can use this opportunity to close down legacy data centers and cut redundant software licenses.

If possible, try to budget for future projects instead of paying as it comes up so you can allocate funds from one project to another as needed in order to maintain a healthy budget. You also want to identify cost drivers like personnel, hardware, software upgrades and maintenance, power consumption and facilities expenses.

Identify any opportunities for cost savings before acting on them. A good way to do this is by mapping out which parts of your business are most affected by changes in IT spending in order to get an idea of how much room there is for improvement without negatively impacting.

Gain IT Visibility

The first step to start optimizing your IT costs is to learn more about your current IT environment. After all, every asset in this IT infrastructure is an expense for the company. Is the IT value created by these assets really enough for their cost? For this, you need a more transparent and visible IT.

Here we come across IT asset management. IT asset management is the process of creating and monitoring an inventory of all IT assets in a company. Companies that implement an effective IT asset management strategy can access all information about their assets through this inventory.

Evaluate Current IT Resources

Applications, hardware assets, integrations, employees and outsourced services are among ITs major expenses. Whether these resources really benefit the business needs to be evaluated periodically. Insights obtained from IT asset management and the IT value and cost provided by these resources can be evaluated together. Companies should dispose of or replace those with low IT value after evaluation.

Of course, this evaluation process is not a simple one. Deep analysis and research are required. For example, if the costs on the server-side are too high, alternatives should be explored. It may be more cost-effective to switch to a hybrid IT landscape. But this may not be possible if the company's operational processes are not compatible with hybrid IT. For this reason, it is essential to set business priorities.

Consolidate and Balance IT Costs

Are your existing resources really working in a fully optimized way? If you are not using more than 80% of your server capacity, you can try to reduce your server capacity. In addition, you can get the same service or product with the same quality at a cheaper price by negotiating with the suppliers who supply the same service or product.

What is IT Asset Management?

IT Asset Management is the process of tracking, managing and evaluating the assets that businesses have in their IT inventory. ITAM is the methodology that makes the technology environment of enterprises more visible and aims to make this environment more efficient. By applying IT asset management, businesses can detect applications, hardware and all other technology assets with low IT value and replace them with those with higher IT value.

IT cost optimization is a business process, not just for IT operations, but for the entire business. It helps both CIOs and line-of-business managers to more effectively manage their IT budgets, making sure that they stretch every dollar as far as possible.

IT Cost Management Software

IT Cost Management Software is a solution where businesses can track all their IT costs. Businesses can track their IT costs based on assets, users, departments and vendors from these applications. Thus, companies have the opportunity to examine their IT spending more holistically.

Loggle is an IT asset management software. With Loggle’s application portfolio management, hardware asset management, integration inventory management and IT cost management solutions, Loggle offers a management mechanism that will enable businesses to make their existing IT infrastructures more efficient.