How companies can maximize profits by rightsizing IT costs

How companies can maximize profits by rightsizing IT costs

Digitization is a topic that companies have been dealing with for a long time, not just since the Corona pandemic, but since then it has increasingly come into focus. Lockdowns and the increase in remote work have once again widened the gaps in digitization as if under a magnifying glass.

But investing in digital upgrades is often associated with high costs. IDC predicts that spending on digital transformation will account for more than 53 percent of all investments in information and communication technology by 2023. In the service sector, there is also the increase in operating costs, which makes managers focus more on cost management and optimization.

Coupled with many unforeseen pandemic-related investments, CFOs are faced with the challenge of making growth investments on a tighter budget. It is therefore important to understand real-time usage, performance and costs in order to make the right investments and select the right providers as part of a future-proof, transformative strategy.

Rightsizing instead of downsizing

But how can companies downsize their costs without cutting their innovation budget? The solution to this lies in cost transparency and in recognizing where significant cost savings are possible instead of losing valuable resources – so-called rightsizing. It’s about ensuring effective and efficient use of resources across the organization, which in turn drives business growth. For example, there is no point in overspending on software licenses when employees are not using them, or underspending and being hit by a software audit and penalties. Instead, it makes good business sense to invest in tools that add value. Resources should not be stretched to the limit in order to avoid both short and long-term negative effects on the company.

Proper sizing across departments

Companies must therefore work towards correct dimensioning. While cost downsizing is simply a reduction in operational resources, rightsizing is about being strategic, streamlining operations and looking at the entire IT portfolio from an end-to-end perspective. This can mean minimizing costs in one area and investing elsewhere to position the company for future challenges and opportunities.

In particular, investments in technologies and services such as cloud-based services enable costs to be reduced while enabling business growth by providing a much more scalable and reliable IT infrastructure that is specifically designed to improve performance and support development and expansion . Companies should also choose software for IT financial management (ITFM) for financial planning and evaluation of IT. It not only helps organizations measure infrastructure-as-a-service (IaaS) procurement progress, but also manage ongoing cloud spend.

However, the digital transformation requires greater collaboration between departments to review the current IT inventory. At the same time, finding the right balance between operations and innovation requires CIOs to make strategic decisions about which technologies to buy and use in each area. The focus must be on future benefits and not just investments in technologies that maintain the status quo. The difficulty lies in finding the right size even in the absence of detailed analyzes that are usually the basis for decision-making by CIOs and CFOs. This inevitably requires foresight and clear, transparent planning, which can only be achieved through seamless management and visibility into cost structures.

Transparency as the key

Traditionally, companies use programs like Excel to manage and plan their IT costs. However, because spreadsheets are created manually, they pose a risk to data integrity and quality. Today, however, there are technological alternatives specifically designed for IT financial management (ITFM) that can simplify and automate the data collection process for organizations . Such tools help organizations of all sizes capture critical operational, project, and vendor cost data in real time. This also enables finance managers to carry out fact-based scenario planning and effective decision-making – from the right sizing to investments in the future.

However, since cost data alone is not sufficient for effective righsizing, usage data is also required, which is a key mechanism for correct sizing. ITFM software can provide more transparency and a better understanding of all IT service processes and provide answers by taking usage data into account. The greater transparency of this software ensures that innovation and digital strategies are at the heart of optimizing services and paving the way for a prosperous business future.

The time for rightsizing is now

To be prepared for future challenges and ensure business success, companies should invest in their digital skills now to become more powerful and resilient. Rightsizing and optimizing budget spend for reinvestments will be critical to success, but is only possible with transparency and visibility. Those who have these insights will be one step ahead of the competition.

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