IT leadership: How to prepare for economic uncertainty

As organizations brace for economic turbulence in the coming months, consider these practical cost-cutting strategies for your IT team
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Recent shocks to the world economy – such as supply issues, the Russia/Ukraine conflict, and inflation – have led to economic uncertainty and probable contraction.

Organizations worldwide are preparing for what’s ahead. According to our survey, leaders of organizations are planning for the possibility of tougher times while simultaneously prioritizing investments in new technology to help them overcome future challenges.

Strategically cut costs

Cutting costs too often focuses on what to stop doing, such as determining which projects to put on hold or when to freeze hiring. However, the first step for IT leaders should instead be to ensure that current spending is well controlled and that existing investments provide the best bang for your buck. Poorly managed IT spending can drift higher unintentionally, so it is crucial to shed light on technology usage across your organization and ensure that spending is controlled.

IT spending has boomed over the past few years in many organizations, especially on cloud services and SaaS. Gartner predicts that by 2025, 51 percent of IT spending in the application software, infrastructure software, business process services, and system infrastructure markets will shift from traditional solutions to the public cloud. Determining areas of spend is best accomplished through a data-driven approach, first focusing on areas of waste and later looking into potential new technological investments.

[ Also read CIOs beware: IT teams are changing. ]

Reduce wasted spending

Most SaaS applications use a “per user” license. You can significantly reduce costs by monitoring active users and identifying employees who have not used an application within the last 30, 90, or 365 days.

Sometimes it’s possible to identify these users through your Single Sign On (SSO) provider, which may be able to spot when sign-ins aren’t occurring. Technology intelligence platforms also apply an installed user agent to track application usage through a browser (but keep in mind that this tracks only SaaS application activity, not all web activity).

Once you’ve identified the non-users, de-allocate unused licenses to save costs or offer the licenses to other staff members. When your contract is up for renewal, you can better assess usage to ensure you purchase only the number of licenses you need.

Right-size cloud services

Once you’ve tackled waste, you can address the next issue: “right-sizing” cloud computing services. It is incredibly common to spin up instances with more capacity than is needed; simply shrinking them down to the right size once you can assess their load can significantly reduce your cloud bill.

It is also crucial to reserve capacity. By committing to using instance types for 12 months – and standardizing on instances where possible – you can drop the cost of those resources by around 30-40 percent. At Snow, we have realized significant savings by removing redundant and unused services such as unattached storage volumes, load balancers, or unused IP addresses. 

Keep your teams involved and informed

The next area is to re-examine where your team members spend their time. Do you have manual processes that could be automated to free up staff time? Automation tools can help improve employee productivity and free up IT staff to work on more valuable and interesting projects. Enriching IT roles also boosts staff retention, which in turn benefits company morale and culture and helps prevent incurring recruitment fees and new hire training costs.

As an IT leader, involve and communicate clearly with each team member. Keeping your team informed of what the organization is doing to compensate for economic difficulties helps to reduce uncertainty. This is important because when people face uncertainty, they create their own narrative, which can negatively impact morale. Being transparent with your teams also creates the potential for a wider variety of solutions and increases a sense of involvement among team members.

Having proven their resiliency throughout the pandemic, IT teams can further prepare for future economic uncertainty by evaluating areas of spend, strategically making spending cuts, and prioritizing employee experience and organizational transparency. While this is a particularly challenging time for IT teams, the lessons learned today will serve them well for years to come.

[ Discover how priorities are changing. Get the Harvard Business Review Analytic Services report: Maintaining momentum on digital transformation. ]

Alastair Pooley is the Chief Information Officer at Snow, where he is responsible for global IT strategy and implementation.