Many companies have to manage the bottom line while maintaining their IT budget. There are many factors to consider including an understanding of the IT costs, aligning IT spending with business strategy and viewing IT expenditures as investments to increase business procedures and processes.
There are two factors to consider when looking at IT budgets and IT projects.
- Estimating what a project delivery will cost.
- Controlling costs during the project and after the delivery.
Here are some methods that will help predict and manage costs in any IT project you have planned.
Control Baseline Costs
Baseline costs is nondiscretionary money spent maintaining IT infrastructure. These are the bare costs required to keep your IT infrastructure operating daily. Baseline costs average 70% of all IT spending for the average organization. These costs tend to rise over time due resulting in less money for discretionary project work. This actually gives the appearance that IT costs are rising while the value derived from IT investments stays the same or actually goes down.
Good news is that baseline costs can be easily controlled using a couple of steps:
- Renegotiate vendor contracts
- Re-examine service levels
- Manage assets effectively
- Consolidate servers
- Maintain a solid IT infrastructure
By following these simple five steps, you can lower the percentage of the IT budget allocated to baseline costs and keep them in line and not over doing your IT budget.
Understand Long-term IT Costs
Ongoing application costs are about 40% to 60% of the original development cost for each year in a life cycle. The costs result in application support, maintenance, operations, software licenses, infrastructure, and allocated help desk. Controlling these ongoing costs is critical. You should collect and maintain information about all new development work underway. With your IT consultants, communicate effectively and keep the lines of communications open. Always keep historical record of all costs on the project.
Implement Short-term Cost Cutting
Try to postpone capital purchases or negotiate better costs from trusted vendors. Always control project scope of work and come to agreement with your IT consulting partner. Control spending. You should use external consultants to fill a knowledge gap or fill a resource gap on the project.
Implement Long-term Cost Cutting
Be strategic when it comes to your IT infrastructure. You have to eliminate duplicate processes and systems while eliminating unnecessary costs in the process. Reprioritize your IT projects on a regular basis and outsource selectively.
Quantify Your IT investments
Always evaluate your IT infrastructure. IT exists to support your business processes and productivity. IT allows you to reach your strategic goals. IT infrastructure will improve operating efficiencies and productivity.