Many companies around the world are facing tough times due to the COVID-19 pandemic, notes Kimoon Kim, Data Director and Co-founder of teraflow.ai. Many have closed their doors or are struggling to survive as they do not have enough customers to keep afloat. The few that are open are providing an essential service.
Cost-cutting across different areas of business is the only means of survival in these tough times. The first cost-cutting area usually is the IT department. Traditionally known as the highest cost generating area, many C-level executives are now looking at cutting or stopping projects, services or even people.
While this can alleviate some short-term pressure, in the longer term, it can severely impact your product or services offerings. Once the pandemic has passed, and organisations are ready to accelerate, it would mean that the cost, time, and effort would need to be reinvested again. This will hurt an already fragile organisation.
What follows is three proven ways to reduce your IT costs, based on the trends I’ve seen in the industry working with enterprise IT environments.
Leverage the cloud if you need to buy servers and reduce your up-front payment costs.
In my experience, most organisations spend around 25% of their IT budgets on CapEx (e.g., servers), and this typically needs to be paid upfront. It’s an expensive route as you must cater for future workloads and up-front licenses costs. The best solution is to move to an IaaS (infrastructure as a service) model. The benefit is that you pay for what you use on a monthly basis, resulting in lower monthly costs. Here is an example:
We run a business that needs to refresh the SQL server hardware, requiring 5 servers, costing $180,000 (licenses and hardware) over 3 years. Instead of paying $180,000 upfront, we can rather leverage the cloud provider’s monthly payment terms. If the cost of on-prem and cloud are the same over 3 years and we move our servers to the cloud, we would only pay $5,000 per month, flattening our expense curve and freeing up budget for more crucial areas of investment.
Note: This is not factoring any optimisations or commits (longer-term commitments based on spend) where one can get further discounted prices. I am just showing the benefits of spreading the costs over a period in which businesses can leverage in this tough time.
Move your backup and DR strategy to an IaaS model.
Like the above, backup and disaster recovery (DR) frameworks account for a large portion of company budgets. This is because backup and DR are crucial to every IT strategy because they need to ensure they are compliant with governance, and most importantly business continuity in these times of crisis. However, for an effective solution to be implemented, additional hardware is often required (e.g., servers, storage drives). Similar to migrating to the cloud, backup and DR can be done on the cloud. Recovery can be done with a click of a button and because this is also a pay for what you use model, you only pay for storage and compute that you use.
If you are already a customer of any of the cloud providers, ask for credits or for payment extensions.
The highest costs amongst start-ups and small businesses are usually cloud infrastructure costs. If small businesses or start-ups go out of business, the cloud providers themselves would be severely impacted due to the large proportion of small companies that are born in the cloud. They do not want that, and they are willing to help! The options for cloud providers to foot some of the bills via credits or defer payments to a later date could save some organisations from going out of business. It does not hurt to ask, so ask your cloud partners, or cloud providers for help!
These are some of the approaches you can use to save some money in this challenging time without cutting the most critical assets within your company – people. We will save the technical details on how we can go about designing and building these hybrid environments for another day.