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5 Ways to Reduce IT Costs


5 Ways to Reduce IT Costs

By Patrick W. Dunne

A report from CIO Magazine found that most successful small businesses have conservative IT budgets. Nevertheless, small companies spend an average of 6.9% of their revenue on IT expenses, which is almost a full percentage point higher than CIO Magazine‘s recommended spending range.

Gartner believes that worldwide IT spending will increase to $3.7 trillion by the end of December 2018. However, Gartner also believes that most companies can reduce their costs by 10% in a year and by one-fourth in three years by utilizing the right techniques.

Lowering your IT costs can free up money which can be re-invested into other areas such as growth and innovation. In other words, the less a company spends on IT, the more they can spend on moving forward and outshining their competitors. According to Sunny Gupta, founder of Apptio, most companies pay about three-fourths of their IT budget just “keeping the lights on” or making everything runs smoothly rather than advancing.

Learn how companies can successfully lower IT costs and expand their business:

Virtualize servers

In a nutshell, virtualization means digitizing hardware, servers, and other physical components. Perhaps the simplest example of virtualization is storage clouds. Companies can put their private data and documents on an online cloud rather than a USB drive or any other form of hardware. According to Gartner, virtual servers have a utilization rate four times higher than that of physical servers. Also, virtualization saved money on energy and hardware expenses.

Outsource IT staff

IT staff members make up about 8% of total IT expenses. It’s not uncommon for businesses to outsource offshore employees to solve IT problems. In 2016, Deloitte found that 72% of companies outsourced IT workers and that 59% of companies said that it helped save them money. An article Enterprise Systems Journal claimed that they saved up to 40% thanks to outsourcing their employees.


Transforming several different systems into a lone unit can help cut expenses while freeing up time and physical space. It takes a great deal of effort to successfully consolidate several groups and combine them into one streamlined solution, but it’s impossible not to notice the results. Companies should examine their IT expenses and see what can be consolidated. The savings will make a tremendous difference.


By making sure that each piece of hardware or equipment is consistent with one another, companies can save a significant amount of money on IT spending. According to Cisco’s IT blog, standardization helps cut operational costs and improve scalability, reliability, and time-to-capability. Standardization also helps your IT staff, as they only need to learn one type of operating system or software, meaning troubleshooting and problem-solving is far more straightforward.

Cloud adoption

According to data from market research firm Vanson Bourne, companies who use cloud save over 15% on IT expenses and more than 16% on IT maintenance costs. Additionally, those businesses discovered that cloud adopted fueled both growth and efficiency. The data shows that cloud adoption makes a significant impact on IT spending. A Cloud Security Alliance study concluded that over four-fifths of businesses already include their cloud in their IT spending plan. 


Reducing IT costs can significantly benefit any company. Currently, most businesses only use about one-fourth of their IT budget on innovation. Imagine how much more funds can be reallocated to more productive uses once firms think critically about their spending. They could increase efficiency and cut costs dramatically.


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