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5 Ways to Analyse and Optimize IT Expenditure in an Organization

We all use technology in our lives today. For some, it’s a lot more than the others. As we find new ways for technology to enhance our lives and businesses, we also accumulate multiple types of physical devices and media to access technology. Newer and updated versions of existing products enter the market every few months and the fast pace of evolving products has meant that users keep buying technologies without evaluating if they really need it. As a result of this, we’re all left with outdated and unused devices and media. This issue gets scaled multifold when applied to the enterprise. Focusing mainly on business environments, I will talk about some ways we can avoid wasteful expenditure on technology. I also use technology to reference both software and hardware.

1. Understand the role of technology in your business

Ask yourself the following important questions while setting up a business:

1. What role does technology play in your business?
2. Is it at the core of your business or does it support the rest of the work?

These questions can greatly influence the kind of technology you procure. It allows you to align technology to the business goals and consequently plan for the right technology.

2. Align your growth plan with your technology requirements

According to the Companies Act of the UK, organisations are classified into four categories; micro, small, medium and large or enterprise. This classification is based on the company's annual turnover as well as the number of employees. For the purpose of this article, let’s consider the number of employees in the organisation as an indication of its size. In this case, an organisation with less than 10 users is micro, 50 users is small, 250 users is medium and 500 and over large/enterprise. Using this classification, we should be able to size, procure and implement only technologies that are would scale to fit the number of people we have in the organisation.

Most, if not all technologies in the market come with a rating for the capacity of users it is able to support. Some manufacturers will make technologies for a specific business size. For example, some of these technologies are marked as SOHO for Small Office Home Office, typically less than 10 user setting, but because they are cheaper compared to their counterparts, business tend to procure them regardless of their rating.

When planning for the purchase of technology, it would be important to understand the growth of the company within a stipulated and period, say five years. If, for example, your organisation is currently at 50 people but the growth plans are to reach a user number of 100 in 12 months, it’s better to procure technology able to support at least 110 users today. This will allow you to expand the number of users but still maintain your technology for the cycle of its life.

3. Carefully plan the lifecycle of technology in your organisation

It’s important to define how long you will use a particular technology before you deem it obsolete for your organisation. The ageing of technology runs from procurement through to disposal. You will need to determine the length of this cycle internally for your organisation. There is no fixed period for which you should use your technology, however, a few guiding principles can be used to assess the functionality and efficiency of technology over time within the organization. Earlier this year, Microsoft ended the support for Windows XP since it was introduced into the market in 2002. This basically means that if you bought a computer built to the specification of Windows XP, it’s now regarded obsolete and would not be able to support future releases of newer operating systems from Microsoft. To upgrade to the newest Microsoft OS you would need to procure newer hardware that supports it.

Once your technology and device has reached an obsolete state, you will need to plan how to dispose it. The disposal process needs to be managed effectively for the organisation to benefit from it. As you dispose old technology, you would most likely be replacing it with newer products. You can choose to reduce the cost of obtaining new technology by selling off the old technology either at an auction house or trade-in with manufacture. This is why you need to have a reasonable life cycle timeline so that at the point of disposal your technology is not completely unusable. The longer you hold on to technology the less valuable it gets. Absence of a disposal plan normally results in hoarding of technology because organisations do not know what to do with their outdated technology.

4. Work closely with your vendors

Vendors are a very important part of your organisation. The relationship between vendors and your organisation should be that of partners. The vendor should be able to understand your business, how you work, your needs, and plans. Besides having a close-knit relationship with vendors, you should select vendors who are authorised resellers of the technology that you procure from them. Some vendors are sole resellers of only one product while others would be resellers of multiple products. There are pros and cons of each of these relationships and you might need to evaluate them independently. For example, a vendor that represents one product will always be limited to the solutions they propose to your business and we know that no one single manufacturer has the best solutions for all technology domains. Either way, having a good relationship with vendors is always beneficial as they would be able to offer you the optimal solution for your business. The other advantage of working with authorised product resellers, is that they are able to extend manufacturer warranties to you, allowing you to replace defective technologies at minimal or no cost. Some product manufactures also have buy-back programs that will allow you to swap old technology for newer technology for less than the market price. All these benefits can only be enjoyed once you have a good working relationship with an authorised product reseller.

5. Have a competent IT buyer

Granted the procurement process of the organisation should be handled by the procurement function of the organisation, however, the sourcing process should completely be handled by a technology expert. It should preferably be someone who understands the organisation and the role technology plays within. The default function for this would be in the IT department of the organisation. In the absence of an IT department, input about procurement decisions can be obtained from third-party consultants or vendors. However, if vendors are chosen, care should be taken to avoid conflict of interest. One more thing to note is all procurement should be done through the same procurement process to avoid multiple procurement channels for the same organisation.

So if you follow a few of these simple guiding principles while procuring technology, you’re likely to make some wise and well thought through decisions that avoid wasteful IT expenditure.  I’m looking forward to hearing other ways that have worked for your organisation.

Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.

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