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Why it is Important to Fix Your IT Costs

Organisations across the world are undergoing an extraordinary transformation. A new generation of technology is changing the way businesses maintain security, customises a product, enhances the customer experience, markets their products and more. In time, and possibly in a short period, the entire way UK companies engage with their customers will be different, or rather will be very customised. Driving this change is the rise of new technologies. UK companies which combine this with the right IT budget (which can be tricky at times) can seize this opportunity.

Type of IT Cost

IT budget is a combination of total information costs which include IT spending and salaries of all IT users. Information costs include buying of services from service providers, advertising agencies, consultants, and accountants to support the information workforce.

IT Cost Segment

Sub-Segment

Type of Expense

Description

Acquisition Cost

Hardware

Direct

Initial hardware purchases or lease costs. Customers can choose a cloud-based platform or build it in-house which would incur a significant expense.

Software

Direct

It includes software costs with a monthly, yearly or one-time plan.

Implementation

Direct

The cost associated with setting up a new system.

Subscriptions/ Licenses

Direct

Either each license to be purchased separately for each user or it can be a package with access to multiple users. The cost would differ based on the type of license/subscription.

Data migration

Direct

Data migration can be surprisingly expensive, so it is advised to check with vendors on what the pricing policy is and if they offer this for free.

Training

Direct

Though this is considered to be the largest cost in the acquisition stage, investing in training will improve business efficiency.

IT Cost Segment

Sub-Segment

Type of Expense

Description

Operations Cost

Security

Direct

Managed security services to help reduce and mitigate various forms of cyber threats.

Ongoing training

Direct

Ongoing training can be for current users looking for training on specific complex features or for new users to expand the knowledge of the platform.

IT Maintenance

Direct

Overall IT platform maintenance and software upgrades comes at an additional cost.

IT Support

Direct

IT support services for the installed system will come at a cost. It is advised to check with the vendor if they offer 24/7 support to keep operations running at all the time even if it comes at a premium.

Data Center

Direct

Another cost to consider is the costs associated with maintaining in-house servers and hardware.

Downtime

Indirect

The cost associated with productivity and revenue loss due to inaccessible systems during a disaster.

End-user operations

Indirect

Productivity lost due to troubleshooting, bad end-user interface, etc.

IT Cost Segment

Sub-Segment

Type of Expense

Description

Resource Cost

IT staff

Direct

Salaries for a team of IT professionals to keep systems secure and running.

Strategy consultant

Direct

External vendors/consultants offering clear and structured strategic IT planning support to businesses. Ensuring the IT strategy is aligned with the needs and demands as the company grows and develops.

Administration

Direct

Salaries to additional resources to manage CRM and other marketing automation tools.

Why fixing IT costs is important

Effective IT spending plan: IT cost allocation is a complicated process even for large organisations. Budget constraints and limited IT expertise often keep SMEs from making effective IT spending decisions. Better visibility into the type of IT costs can help SMEs come up with a definite IT spending plan based on their business requirements.

Cushion against surprise cost: A better knowledge of hidden hardware and software costs can help enterprises reduce unnecessary costs and reallocate resources to more critical business operations. Before investing in new IT equipment, it is essential to evaluate an enterprise’s spending history and implement best practices that will improve the bottom line.

Balance cost among hardware, software, and services: Fixing IT cost will balance the spending among hardware, software and services. Strong systems management is the key to overall cost reduction, per a report by Gartner. The more budget allocated for direct IT expenses, like operations, training, support and services, the less budget will be wasted on lost productivity and downtime.

Reduce total cost of ownership (TCO): Enterprises when planning for IT cost, should factor in the total cost of ownership (TCO). IT systems need to be upgraded and maintained continuously. Constant costs related to IT security, software updates, labour, repair and tech support are unavoidable. However, simplifying the IT infrastructure and management processes will increase productivity, efficiency and reduce TCO to a great extent.


“For IT, total cost of ownership (TCO) includes hardware and software acquisition, management and support, communications, end-user expenses and the opportunity cost of downtime, training and other productivity losses.” - Gartner

How fixing IT cost can benefit an enterprise

Managing annual IT expenses will help in understanding the actual IT implementation cost and how to avoid costly and ineffective solutions. Estimating IT infrastructure cost over a period of time helps enterprises make better buying decisions when deciding which solution provides the best possible ROI.

Options

Cost

Review

In-house System

Expensive

Generally, in-house systems are built based on the company's requirement by a team of IT professional. This type of IT solution is costly for SMEs, hard to maintain, and will always be on the lookout for experienced IT professionals.

Enterprise Suite

Expensive

Enterprise Suite usually is an enterprise CRM as the core technology stack and requires different custom integrations with third-party systems. 3P systems may include sales automation, social media, project management, website tracking, predictive analytics, among others. Purchasing different platforms from different vendors and user training for individual platform makes this option an expensive one.

Integrated Solution

Moderate

CRM platform integrating marketing, sales, customer service, operations, etc. into one single platform. This complete solution offers a much more profitable ROI when it comes to technology purchases as all the tools come in one package. Enterprise's all data and information are stored in one location, which is accessible to employees of different departments. These features make this option a better choice as compared to option one and two.

Managed Service Provider

Affordable

Among the four options, the best is outsourcing IT services to a Managed Service Provider (MSP). MSP is often recommended as the cost-effective IT solution for SMEs. For a minimal fixed monthly fee, MSPs provide customised IT solutions and services based on the business need.

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