It's that budget meeting you dread…
You are greeted by dour faces as you sit down and brace for bad news – “We didn’t make our numbers this quarter, and we’re going to be in deep trouble if you don’t tighten your belts – and do it fast.”
The fastest way to make cuts is to reduce headcount, right? Give ’em a quarter or six months’ notice, a severance package, and kick ’em out the door.
The fastest way to make IT budget cuts is tech layoffs, right?
But your knowledge-based workers have very specific skills, and, if they’ve been with you for a long time, they have specific knowledge of how their skills match up with your business. When you lose them, it hurts.
Post-pandemic and immigration issues notwithstanding, there are still not enough tech workers out there for the work that needs to be done. Skilled labor is having no trouble finding new positions pretty quickly, and judging by the avalanche of head-hunter calls I receive each week; it’s likely the case.
But what if there is a solution that would enable you to retain most (if not all) of your staff and reduce your IT spend for years to come?
Scenario 1: You Have One Or Two Quarters To Make Cuts
Let’s say you’ve been given one or two quarters to find savings. (In my experience, you probably have more runway on this project than the budget folks would like you to think). So, you have some time to look at alternative cost-saving measures.
IT budgets are usually divided into three sectors: hardware, software, and employees. Let’s say you’ve been ordered to cut 10% of your overall IT budget (probably only 5%, but they want to scare you). If each sector represents approximately 30%, reducing one sector by 30% reduces your overall IT budget by 10-15%.
How can you save 10-15% of your IT budget without cutting staff? Get your asset management program up and running fast.
You’re probably thinking, “I need to find savings, and an asset management program is going to cost me money.” That’s true, but before you stop reading, let me make my case for why IT Asset Management (ITAM) is the best place for you to start saving money.
How To Do It
Your first step is to get someone in there to give you trustworthy data and model your asset lifecycle to get you to the magic number of 30%. If you bring in an outside firm (like mine), it’s a capital expense. You need to do it only once and for a relatively short period of time – typically about 9-12 months.
The key is, our fee will come out of CapEx and significantly reduce OpEx. And that’s why you can sell it to your C-Suite:
“I’ve got this firm who says they can cut our software budget by about 30%. Our software budget is the second-biggest operating expense line-item in the entire IT budget, and that should work out to about 10% overall savings. I need to bring them in on CapEx, but they will end up saving all these OpEx dollars. Plus, our ITAM team will benefit from all this knowledge, which will put the organization on a growth trajectory after we clear this budget crisis.”
Your asset management will follow a J-curve timeline model. There’s a dip at the beginning of the project when the money comes over to get the program kicked off. Then it curls along and starts to sweep up as savings kick in. Soon after, you’ve paid it off, and now you’re in gravy.
- How long will it take before cost savings are found?
- How long until we reach the break-even point between the CapEx and OpEx savings?
- How long until we hit 30% software savings?
Answer: We don’t know, but the sooner you bring in the experts, the sooner you can get those results. And in my firm’s case, we often construct our contracts in such a way that there is an incentive to get those savings faster.
Scenario 2: You Have Only A Few Weeks To Make The Cuts
If you’ve been given only a few weeks to make your cuts, that’s not enough time to find savings through asset management before you have to lay off tech workers. In the aftermath of a layoff, there are many opportunities for cost optimization and asset management that can help you tighten things up.
Now you have a smaller staff which means you have a bunch of software and hardware you no longer need. Go to your software rep and tell them you just suffered through all these layoffs and ask them to cut you a break. You’d be surprised at how understanding they can be because they’re motivated to keep your account. They count on things going back up, and if they’re nice to you, they’re more likely to earn your business when things are good again.
And, in terms of hardware, you can recycle, re-purpose, or re-sell it. There are savings there…figure out what that write-down looks like. You can save even more money here and buy some more time to get your cost optimization plans in order.
So, if you’ve been ordered to make cuts, consider launching your ITAM program now and avoid tech layoffs. Remember, asset management is a short-term capital investment that will pay out long-term operational savings for years to come!
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