10 Unexpected Ways of Reducing Tech Spend

Have you ever wondered why "technology costs are coming down" but tech companies stock prices are at record highs? Here at StableLogic, we have been helping companies in reducing tech spend for the last 30 years, and we have found these methods most useful to keep your costs under control and avoid the cost traps.

1. Conduct an Audit

On average, 35% of corporate technology services are not used, representing a significant amount of wastage and an opportunity in optimising & reducing tech spend for businesses.

Audits are an effective way to highlight unused services but also used to analyse invoice accuracy. Vendors are notorious for billing inaccuracy and organisations can often claim credit for billing errors.

In order to complete a comprehensive audit, we recommend the following process:

1. Data Collection (including copies of contracts, invoices and usage information)

2. Data Analysis (including inventory analysis, cost compliance and usage analysis)

3. Report (including detailed findings for each billable account)

We find that audits typically deliver 20% cost reduction.

2. Benchmark Your Vendor Agreements

According to a report from Gartner, companies that actively engage in contract benchmarking can save between 12% to 25% on their annual vendor spend. Vendors will often bake in annual increases to contracts at the beginning of a contract, which combined with already increasing spend and total licenses, can lead to spending that is much higher than the industry average.

To combat this, benchmarking at least once per year can ensure you are getting the best deal without risk of cost creep.

3. Renegotiate Your Pricing

The technology market has never been so competitive. Vendors will do everything they can to lock you into long term agreements with inflationary price hikes - do not accept this. Given the high levels of competition, companies should feel empowered to negotiate pricing that works for both parties.

A good deal is a deal that delivers value for your business and sustainable revenue for the vendor. If your vendor is not prepared to negotiate a mutually beneficial deal - look at the competition.

4. Right Size Your Plans

Technology vendors often bundle functionality into tiers or plans. This allows vendors to upsell and lock in revenue.

Often these plans were acquired many years ago and the business needs may have changed. It is best practice to routinely 'right size' your plans based on your actual present day business needs.

Vendors also often retire certain plans and release new plans at a higher base rate. Analysing and navigating these pans can be complex - StableLogic can support you in determining what is best value for your needs.

 

5. Consider Insource vs Outsource Models

Organisations tend to have a combination of insourced and outsourced services and resources. Both can drive good value for organisations, but it is critical the blend of these methods is optimal.

A hybrid model is typically most common - offering value for money and a high quality solution to the business and its customers / employees.

Companies should review their approach from time to time and leverage market intelligence to make data driven decisions.

 

6. Review Your Target Operating Model (TOM)

Technology can only get you so far - a well designed TOM can separate the very best from the very average. Consider your Operating Model and seek independent guidance on the latest best practices from experts in your field.

 

7. Cloud Migration and Optimisation

Migrating licensing to the cloud can lead to a number of cost efficiencies that companies may not always be aware of, not just on preferential license pricing from Vendors for cloud licensing. With the migration of services to the cloud, companies are able to take advantage of the following benefits:

1. Right-sizing your licensing - often on-premise deployments come with a set number of licenses, or portals that make it difficult to manage attributing licenses, which leads to admins purchasing more than they need. This can be rectified through effective SCIM policies in the cloud.

2. Autoscaling your infrastructure - companies will often be running significant compute power 24/7 to ensure they can meet peak capacity demand, but this is often not required throughout 75% of each day. Autoscaling can deliver significant cost savings with zero risk to the business.

3. Pay as you go - whilst not a direct cost saving on current expenditure, companies can trial and test new services at a fraction of the cost in the cloud, enabling greater speed to innovation and delivery.

 

8. Retire / Rebuild Aging Platforms [Rearchitect Your Applications]

Industry estimates suggest that 50-70% of UK companies are operating on outdated legacy infrastructure for their service delivery. These legacy solutions are inhibitive to innovation and a company's ability to respond to customer demands. By rearchitecting these solutions, companies are able to deliver cost savings through internal efficiencies, and reduced time to service their customer base.

As well as delivering direct cost savings, rearchitecting legacy solutions allows companies to take advantage of modern tools and features, helping them to generate greater value from products and services, as well as maintaining market relevance.

 

9. Consolidate Vendors

A typical large business will have well over 30 tech vendors for a myriad of services. Consider the service offerings from these vendors and conduct an analysis to determine if consolidation could be an option.

Along with ease of management, the single largest benefit of consolidation is cost reduction through economies of scale.

Engage a partner with a wealth of knowledge on this topic to gain access to detailed market intelligence and benchmarking data.

 

10. Automate

With significant innovation in recent years across AI, Machine Learning, and Robotic Process Automation, companies are more capable than ever of delivering automation across repetitive tasks within their business.

The average UK employee is estimated to spend between 1-2 hours per day on repetitive tasks which could be automated. By removing these tasks from employees, companies can deliver significant efficiencies and massively increase productivity.

 

Key Takeaways

In todays challenging market, reducing tech spend is critical for business success. Technology vendors profit from mismanagement of spend by companies - don't fall into their trap.

If you would like to learn how StableLogic can help you to optimise your technology costs, please get in touch.