There are many ways to manage technology costs and stretch your IT budget, but there are well-known ways and then there are lesser-known ways. You can’t make all the moves if you don’t have all the pieces. Here are the common ways to save money and some little-known secrets too.
Common Ways to Save on Technology
Rate Optimization or Contract Optimization
Rate optimization involves paying the lowest price possible for a product or service before you ever sign an agreement. Reducing the rate you pay requires a clear picture of the available pricing models, plan options, as well as all available discounts. It helps to keep an eye on industry trends, new offerings, market price indexes, and unit costs across different providers.
Performing a savings assessment or asking for a professional rates and savings analysis will define how much you stand to save by switching to a more cost-effective provider. To get the best deal, you may also want to have a strong negotiating position or use an RFP process to encourage competition among multiple providers bidding to earn your business.
Usage Optimization or Reducing Waste
Usage optimization is all about ensuring that services and technology assets are being used efficiently. By reducing waste, you can avoid unnecessary expenses. This involves knowing what you have and monitoring usage patterns to identify anything that is underutilized or unused. With the right usage analytics, IT, finance, and procurement leaders can make strategic moves to optimize. These actions might include:
- Reallocating resources to improve utilization.
- Downsizing resources to avoid costs.
- Reducing overage fees by limiting usage beyond a specific threshold or more closely matching service plans to business needs
Forgotten Money-Saving Tricks for Technology Cost Management
The Tech Repo
Accelerated innovation has resulted in a lot of digital technology force-feeding. Is it time to reverse course with a tech take-back? Many companies find they don’t need their assets, services, and tools. Rightsizing is one thing, but today IT leaders are entering a new wave of tech repossessions.
- Communications tools are a notorious source of tool redundancy. How many video conferencing applications and collaboration tools do your employees own – much less use – on a daily basis? Can you consolidate and save?
- When there are plethora of communication tools, does every employee need a smartphone? Tangoe’s mobile cost management consultants find that device repossessions can dial back spending by as much as 60%. Mobile repos are lucrative because buyback programs offer cash-back opportunities. Just make sure your partner uses real-time market pricing intelligence to get you the biggest payout. Learn more about that here.
- Microsoft 365 licenses are another source of repos, particularly when companies blanket the employee base with high-tier (and thus high-cost) E3 and E5 subscriptions. Repos may also be in order if subscriptions are purchased outside of the corporate contract. Peeling back the layers on waste can be tricky, however. Optimization means evaluating every license and the usage of each sub-product, so licenses can be removed or reallocated without impacting employee productivity. Here’s a step-by-step guide.
Fostering a Culture of Cost Optimization
Cost-aware employees are the new way to cut costs. Companies are saving money simply by asking cost owners to take more personal responsibility for spending reductions. For example, empowering DevOps, IT engineers, and other influencers to shift from cost as an operational afterthought to a key consideration in the design and development process.
Of course, there’s an art and a science to building a corporate culture that drives down rising IT expenditures. One imperative for success involves empowering employees with the right data at the right time. Decision makers want price comparisons and usage insights at the precise moment of decision. Visibility is at the heart of this strategy. After all, employees will feel most compelled to take action when they understand the financial impact of their purchasing decisions. Automated reporting is essential in reducing the time needed to generate relevant cost data for each internal stakeholder at just the right moment.
Another tip: Reducing any friction points between IT and finance teams. The two will need peacekeeping as they work to balance innovation initiatives against budgetary confinements. Check out this Forbes article for more best practices.
Using Cost Allocations to Share the Load and Create Budget
At the surface, cost allocations may not feel like a money-saving strategy. After all, companies still pay for all their services and assets in the end. However, cost allocations are straight-forward tactic for IT budgets to share the load with other departments, thus making room for more investments in emerging technologies and digital innovation.
All too often, IT budgets take on large financial burdens, paying for shared services that support regular business operations. By allocating shared cloud, mobile, and telecom expenditures with other departments and lines of business that benefit from them, IT leaders can restructure their cost base to find new sources of funding.
Cost allocations are also known as a strategy to help IT leaders identify technology ROI, tying legacy expenses and new tech investments to business outcomes. The first step in cost allocation is to identify which departments are the beneficiaries of IT services, and linking revenue generation data further paints the ROI picture.
Integration is key in this exercise, as IT expense management tools must communicate with corporate financial systems to automate this work. For instance, with Tangoe you can easily set up customizable business rules that automatically charge IT expenses back to each department based on their individual service usage or consumption habits. Our tech expense management platform also generates a General Ledger file, so everything works in compliance with the company’s fiscal management processes.
Eliminating Overdue Payment Fees
Invoice optimization can also include efforts to reduce late payment charges. Tools can be used to track invoice due dates, payment turnaround times, and flag any that are approaching an overdue status. This entails tracking payment windows – the amount of time you have to pay your bill.
Eliminating late fees can mean improved business continuity. Did you know that late payments cause 85% of organizations to experience outages in their cloud, mobile, and telecom services?
Some vendors are slow to issue their invoices or slow to ship their invoices once issued, which shortens your payment window and increases your likelihood of getting hit with a late fee. Tangoe’s client data demonstrates that you can use this rule of thumb to calculate your potential telecom savings on late fees: .25% of your total annual telecom spend.
In 2024, on average, our clients reduced their time to process an invoice by 10% and reduced late payment charges by 33%. Bill pay services can be a helping hand for those looking to make improvements in this area.
Don’t forget to ask about early-payment discounts. Prompt-payment markdowns can be 1-2% monthly and negotiated even higher if bills are paid within the first 7 to 10 days.
Using Invoice Audit and Optimization Tactics to Avoid Costs
Are you getting charged for services you don’t use? Do you see fees and overage charges that you never agreed to? Many IT and finance leaders falsely assume that billing errors are a thing of the past given today’s advancements in digitization and automation. However, there are still cost savings to be found by digging into the details of every invoice and comparing them against usage and contracts.
Consider this: 5% of telecom invoices are overpaid by as much as 50%
Invoice auditing and optimization is the solution for this. This comprehensive review is a checking function to ensure that all invoice details, such as amounts, usage reports, contract terms, purchase orders, and receipts are correct and accurate before the payment is rendered. Once disputes are resolved, billing discrepancies can put money back in your budget in the form of credits. Credits are used to pay your next bill, lowering the total amount you owe.
Tangoe finds that even today 7% of telecom invoices and 9% of mobile invoices contain mistakes. At the end of the year, on average, 10% of annual telecom spending is wasted due to billing errors and credits due. Often the same can be said for mobile spending. Together, that’s a potential 20% savings.
Comprehensive billing reviews and reconciliations typically address: Fixed wireline network circuits, mobile devices, and their associated service plans, contract terms, and data usage. But invoice optimization should extend into cloud technologies as well, helping to identify waste and redundant services.
The secret to success with this strategy is to dig into the details without adding heavy administrative workloads to your internal teams. Invoice automation platforms include data normalization, automation, and AI analytics that can speed your success.
Leveraging Budget-to-Actual Comparisons to Prevent Overspending
Early alerts can help warn leaders of overspending long before the invoice hits. To create a proactive approach to financial management, however, IT financial analysts must focus on monitoring expenses and comparing them to the planned budget.
This strategy evaluates a business’s actual financial performance against its budgeted or forecasted figures. It’s a great way to see if a company is operating as expected, as it helps to identify variances or discrepancies between what was planned (the IT budget) and what really happened (the actual spending). Pinpointing variances is also great for highlighting unpredictable expenses, so cost optimization efforts can be focused where they’re needed most.
When all IT expenses are in one platform it’s easier to analyze budget-to-actual variances across multiple service providers simultaneously. Make sure your toolset offers customizable alerts and spending thresholds.
Save More with Every Trick in the Book
Incorporating both common and overlooked strategies can make a significant difference in managing technology costs. By revisiting these often-forgotten money-saving tricks, companies can uncover new opportunities to optimize their IT budgets. Whether it’s by repossessing unnecessary assets, empowering cost owners to reduce spending through increased visibility or using traditional financial management strategies, every tactic adds value. The key is to stay open to both tried-and-true methods and hidden gems.
Ready to put these strategies into action? Talk to Tangoe.