Five Ways to Stretch Your IT Budget

The faltering economy is putting a damper on small and medium-size business IT spending, says a report from research company IDC.

The downturn in spending is likely to last well into 2009. This means SMBs need to get more from their existing IT infrastructure and look to new, cost-saving measures in order to meet reduced budget parameters. IDC senior analyst Justin Jaffe says IDC research shows small firms (those with fewer than 100 employees) are more likely to delay IT spending, while medium-sized firms (100-999 employees) are more likely to reduce IT spending during the next 12 to 18 months.

Regardless of whether your business is planning to delay or reduce IT budgets, adopting cost-saving strategies is always a good investment. Here are five tips that will help you get the most out of your IT.

1. Be Aware of New Trends

Cloud computing and SAAS (software as a service) are among the hot technology trends that can help SMBs save money by reducing up-front infrastructure costs. Many of these services also offer "pay-as-you-go" billing structures, so that midmarket companies only pay for what they use, similar to an electric or heating bill. You can save substantial amounts of money by switching to VOPI (voice over IP) phone systems and reducing the amount of "snail mail" you send out.

"Green" technologies such as power-efficient printers save you money on two fronts: energy costs and paper consumption. Although green technologies present additional up-front costs, companies such as HP offer rebates and recycling programs, and reducing your power consumption may allow you to take advantage of incentives and rebates. Utility companies may also provide incentives encouraging conversion to energy-conserving IT products. Professional online conferencing software (not to mention Skype, an excellent, free Internet telephony service) improves the telecommunication environment and allows SMBs to reduce travel costs.

2. Have a Focused Budget

It sounds obvious, but dictating a focused budget takes planning and prioritizing. Ask your IT department to draft a company-wide hardware policy, which ensures compatible systems and reduces inefficiency. Although notebook prices continue to decline, desktops remain the less expensive option when you add in notebook peripherals such as a mouse, docking station or extra monitor.

Determine the employees who are most likely to travel and allot your hardware budget accordingly. On a similar note, be judicious when determining the legitimacy of equipment requests. While a 21-inch flat-screen monitor may be "easier" to work on, cutting-edge technology and expensive gadgets can become budget busters. "Most SMBs, and particularly smaller firms, are perennially cash-strapped, and most will not be buying any IT product or service that they don't absolutely need in the near-term," says Jaffe. "That said, delaying purchases may not always be possible: when the PC in the accounting department breaks, there's really nothing else to do but go out and buy a new PC."

3. Determine Critical IT Issues

Many IT departments are faced with providing more capabilities under shrinking budgets, which makes focusing on critical priorities essential. The most important aspect of determining critical issues is fostering participation. Sit down with your IT department and determine what the pressing issues are. Ask your IT team for their opinion, and then take those recommendations to the executive team.

Focus on developing a consensus-based understanding of the role IT plays in delivering specific aspects of business value. If your company can agree on how long-term and short-term issues need to be addressed through prioritization, the business will be better able to cut less necessary expenditures. When presenting new technology implementations, be aware of the immediate ROI.

"Messaging that doesn't focus on solving immediate business problems will not resonate with firms that are fighting to survive to next week," Jaffe says.

4. Negotiate with IT Vendors
 
Because IT spending is expected to slow in the coming quarters, SMBs may find themselves in a good position to negotiate new and existing contracts with their IT vendors. For new contracts, negotiate terms that allow contract flexibility, which can save you costs down the road. If you have agreements ending soon, organize a strategy to explain why your business is seeking lower costs, and be ready to counter-offer. Always remain professional, but come prepared with quotes from other vendors, which lets them know you understand the market. Another tip: Vendors may be pushing to include unnecessary "extras" in order to beef up low prices. Be ready with your set price points and don't get fooled into tacking on services your company does not need.

Jim Locke, president of the SMB Technology Network, says there will likely be some softening of prices in the IT services sector, but recommends small business owners take care when selecting an IT services vendor on price alone, as skill sets in the SMB sector vary widely.

"Owners of small businesses should look to their IT service providers for their professional advice on developing strategies for reducing costs, improving productivity and expanding their markets," he says.

5. Standardize Your Equipment

By keeping your employees connected through infrastructures that seamlessly link together, you'll save valuable time avoiding hiccups in data transference. If possible, standardize the PCs and notebooks your employees use. This also allows you to take advantage of bulk-purchase discounts from a single vendor. Dealing with a single vendor also improves the relationship between customer and vendor, which can lead to additional financial and service benefits.

Software packages such as Microsoft's System Center Configuration Manager or Novell ZENworks, among others, automate common tasks and allow your IT department to control the configuration of end-user machines. "Standardization of equipment can help companies reduce their IT support costs, as their IT vendor has to support a single platform," Locke says. "Standardizing the environment as a whole, with policies, standard hardware and software and warranties are all keys to controlling costs in a small business environment."