SMEs need to evaluate their IT spend in order to reduce it

When faced with an economic crisis, it is natural for all companies to prepare for the worst. To stay buoyant, companies normally try to trim any fat from the business through a process of evaluation and elimination. IT, however, often stays intact because decision makers may be unsure where to start and worry about the risks associated with making cuts in such an important area.

There is certainly some sense to this, as firms simply cannot function effectively without robust and cohesive IT systems. You only have to look at the current crisis to see the value that technology can bring to a business, especially when it comes to areas like remote working. Furthermore, it will be IT that enables companies to emerge from the Covid-19 crisis with pace and vigour.

Without a doubt, today’s economic situation is fast moving and uncertain, making every day more challenging than previously. Decision makers should not shy away from evaluating their IT spend, however. It is entirely possible for firms to reduce their expenditure whilst minimising risk and maximising value – they just need to know where to start.

Here are some key steps that SMEs can take to assess their IT spend:

1. Review line by line

This means sitting down with IT leadership and looking at current, committed and projected spend. This is obviously fundamental. Mapping out spend, as soon as possible, will naturally highlight the potential for any immediate or potential reductions in operating and capital expenditure. Start with OpEx, but don’t forget CapEx.

2. Focus on non-essential spend

Look at costs that can be reduced or stopped altogether. These primarily include non-essential licencing costs, memberships and subscriptions that often bill in the background unnoticed. Cutting out these nice-to-haves can have an instant impact and can be reinstated when needed.

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3. Communicate with service providers

When an economic crisis strikes, providers are more likely to be flexible with their terms if you are honest and open about any issues. In some cases, it may even be possible to revise and re-sign contracts based on agreements that work for both parties.

4. Look to the cloud

Many firms have cloud systems with a capacity that far exceeds demand. Assess what your real needs are in this area and what your options are to reduce spend without affecting operations.

5. Spending to save

It goes against all financial instincts, but it can actually be more detrimental to halt all spending than to continue with key projects. Putting the brakes on transformation projects, for example, may cost the business both in the short and long-term. Instead, look at tweaking the scope of any planned activity.

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6. Keep innovating

Just as halting transformation can be damaging, focussing on innovation and R&D can pay, literally – as both can be claimed back as a tax credit. Too many businesses miss out on these, even though credits can cover the bulk, if not all, of the costs associated.

The claim limit process is two years, however, so businesses will need to ensure that there’s cash available to cover any initial outlay.

7. Repositioning staff

Furloughing or reducing numbers may be inevitable, but decision makers should consider whether IT staff could deliver more value by taking on new roles. For example, if a developer’s project has been paused, could they help get key KPIs over the line in other ways?

Cutting costs can be a risky business, particularly when it needs to be done quickly, so centralised and controlled decision making is essential. IT infrastructure is a vital artery of the business, so poor decisions can damage the entire organisation.

The need to weigh up costs against value seems like common sense, but it can be easily overlooked when business leaders are under pressure. Making this area a priority will pay significant dividends, however, both now and in the future.

Written by Robert Rutherford, CEO, QuoStar

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