IT Budgeting: Why Cost Management Is So Important
Most companies practice cost management throughout the organization, but IT budgeting is often overlooked. Yet, IT cost management services can profoundly impact your company’s productivity, competitiveness, and profitability.
IT cost management requires an in-depth understanding of every dollar spent on IT, but it shouldn’t all be lumped together. Instead, budgets should be appropriately categorized and analyzed to enable data-driven cost planning and control.
Cost management in IT is essential for an organization’s success. Effective cost management allows for strategic IT sourcing and cost-cutting that doesn’t impact operational excellence.
Should your organization re-evaluate its IT cost management plan? Keep reading to learn why IT cost management is so important.
What is Cost Management in IT?
Is cost management the same as cutting costs whenever possible? While IT cost reduction is involved, cost management goes beyond looking for ways to cut spending.
Managing your IT costs involves four phases that create a comprehensive strategy that doesn’t sacrifice quality or your ability to operate. These phases should be conducted regularly, rather than once:
- Resource planning: This vital yet often overlooked phase involves understanding the entire scope of your IT landscape. It should consider any planned upgrades, ranging from upgrading network hardware to migrating to a cloud platform. Include the human, hardware, software, and other resources your IT landscape requires.
- Cost estimating: What will your future IT landscape cost? This phase aims to help you find out and often begins with a broad and less-accurate projection that is refined as you go.
- Cost budgeting: Once you’ve planned the resources you need and then estimated future costs, you can start strategically planning costs. You’ll list every IT asset and staff, then allocate available funds accordingly. The goal is to fund your current and future projects and establish an ideal baseline for each item.
- Cost control: The final and more frequent phase continually monitors actual costs compared to your budget. You can adjust the budget accordingly if a specific project or resource is consuming more or less than expected.
You can see how cost management in IT goes beyond looking for ways to cut costs. These phases will take time, but they’re well worth better understanding your IT budget.
The Importance of IT Cost Management
Why should you invest time in creating an IT cost management plan? While it may seem daunting, an accurate budget provides powerful benefits to your entire organization. Let’s discuss just a few ways IT cost management can help your business.
Identify IT Cost Reduction Opportunities
Cutting costs is the most common goal of IT budgeting, but if you don’t make it part of a comprehensive cost management plan, it can create problems for your business.
For example, if you cut your mobile device management vendor without replacing it, you leave your company open to cyber risks. All it takes is one breach to lose more than you were paying for the MDM platform.
IT cost reduction should be informed and strategic. Understanding your IT budget will highlight wasted resources, allowing you to identify opportunities to cut costs that won’t affect your business.
Improves Company-Wide Productivity
Organizations across all industries rely on IT solutions to operate. Cost management helps you gain a complete picture of your IT landscape, allowing you to consider whether a new tool or platform helps your business fit within the budget.
You’ll understand how much you can afford on a new platform and identify obsolete tools that need to be replaced. For example, if you’re using a cloud storage solution with slow upload speeds and overly expensive rates, you can replace it with a modern, cost-effective platform.
Enable Strategic IT Decisions that Create Growth
Decisions to cut costs or invest in new IT solutions should ultimately lead to business growth by enhancing your product or improving employee productivity.
But without IT cost management, you’re flying blind. A complete cost management plan will enable data-driven decisions about how to update your IT budget.
Additionally, incorporating a Vendor Relationship Management platform will further improve your understanding of current contracts. For example, you’ll understand if your vendors provide competitive rates and maintain service level agreements. If not, you can renegotiate during renewal, enforce contract terms, or decide to find a new vendor.
Work With an IT Procurement Partner for IT Cost Management
Finding the solutions you need and paying competitive rates is crucial for effective IT cost management. An IT procurement partner evaluates vendors, understands what they should charge, and negotiates contracts to minimize costs.
Additionally, the right partner will help you create a comprehensive IT cost management plan. 3Quotes is an IT budgeting and procurement expert, and we’re ready to help make the most of your spending.
Ready to make the most of your IT budget? Learn about our IT budget planning services and discover if 3Quotes can help your business.