Small and midsize companies are always looking for ways to save money without jeopardizing their mission and business operations. At the same time, shifts in the market and economic headwinds like inflation, technology advancements, and the threat of recession, bring uncertainty and new challenges that continually “stress test” a company’s workforce, systems, and security. There is pressure to grow the business and stay current with emerging technologies while, at the same time, holding down costs. This is particularly true for small and midsize businesses (SMBs), because they run leaner operations and don’t have the built-in resilience of a large enterprise.
Regardless of the size of your company, IT plays a pivotal role and it typically represents a significant expense. Unfortunately, in-house may lack both an understanding of your business objectives and the technical skills and experience to achieve them.
This paper lays out 6 cost-saving strategies that SMBs can use to effectively manage, streamline, and realign their IT infrastructure and operations. These strategies are particularly powerful because they are designed to reduce costs and, at the same time, strengthen your business—positioning you to not only survive today’s many challenges, but actually come out stronger than before.
“Many organizations face demands for short-term cost reductions, even if they plan to deploy technology in the longer term to sustainably reduce the cost of doing business and create a competitive advantage. The question is how to cut costs while inflicting the least damage on the mid- and long-term health of the business.” Gartner IT Insights, August 2022
Belt-Tightening vs. Transformation
As a small business, you probably run a pretty lean operation (small staff, well-defined roles, essential IT infrastructure and services). This means that belt-tightening alone isn’t going to produce the results you need as you realign your business to weather today’s competitive landscape. When it comes to IT, there’s a time for belt-tightening and there’s a time when only digital transformation will set you up for future success—managing in a more strategic way to cut costs and grow at the same time.
For an SMB, digital transformation is the process of integrating digital technologies and strategies into various aspects of the business to improve operations, enhance customer experiences, increase agility, and drive growth. It involves leveraging digital tools, platforms, processes, and technical know-how to maximize value from your IT investment. It helps you streamline operations, increase efficiency, and adapt to the changing needs of the market. Done well, digital transformation enables companies to do more with less, reducing costs while at the same time repositioning you for success.
“As a business owner, it’s essential to understand that crises are a natural part of running a business. No matter how much you plan and prepare, something will always go wrong. And, at that point, how much damage the issue causes is all up to your strategies and processes. Whether it’s a natural disaster, an economic downturn, or a pandemic (just some random examples); there are steps you can take to protect your business and not only survive, but thrive in a crisis.” 8 Steps to Thriving as an SMB Even in a Crisis, April 2023
6 Highly Effective IT Cost-Saving Strategies for SMBs
Strategy #1: IT Assessment
Before you set your course, you’ll need to take an as-is snapshot of your IT operation to identify risks and associate current costs with business value. In this first all-important step, you want to assess what’s working optimally and what’s not, which will help you identify the changes you’ll want to make and the gaps you’ll need to fill to realign your business.
- How much are you spending on IT-related expenses (personnel, infrastructure, outside services, security, cloud)?
- What are the areas that are working well vs. those that need improvement?
- What are your current risks, particularly as they relate to security and the customer experience?
- Should you partner with an experienced managed service provider (MSP) to help you conduct this assessment so “you get it right”?
- And, does your staff have the bandwidth and technical expertise to complete the IT transformation you envision?
The goal is to evaluate your IT investments and prioritize them based on their value and criticality, their impact on business operations, and their potential for cost savings and ROI. You want to focus on projects and technologies that directly support core business functions and also those that set you up for future success.
Strategy #2: Strategic Financial Partnership
SMBs need to do what they do best. There are a limited number of things they can invest in, and because they can’t be good at everything, they need to make informed choices. Enter the strategic financial partnership.
Every decision you make, with its corresponding set of actions, will have a financial impact on your business. Belt-tightening and IT transformation involve many moving parts, which is why it’s so important to work with a strong financial partner who is at the table as key decisions are being made. As you debate the kinds of changes you’re considering, a seasoned financial professional can help you understand the implications and assess the long-term impacts from a financial point of view. They can also make sure you have a well-thought-out financial plan that will see you safely through your IT transformation.
- Partner with a seasoned financial professional who knows your business (either in-house or a CFO consulting service)
- Make sure to bring them in early to be proactive, rather than reactive, as key decisions are being made
- Look for reductions in both capital and operating expenditures (CapEx and OpEx)
- Translate plans into financial measures and assess their impacts on assets, liabilities, revenue, expenses, taxes, and compliance requirements
Strategy #3: IT Outsourcing
This could be one of the most important strategic decisions you make about IT transformation. The right MSP will have real-world experience that can supplement your in-house resources and help guide you on your journey. Your MSP partner can also help you offload some of your IT tasks by providing cost-effective IT support, infrastructure management, experts who can supplement your in-house staff, and state-of-the-art security services. Working with the right MSP gives you the tools you need to safely navigate your IT transformation as you work to reduce costs and streamline operations. In short, an MSP partner gives you specialized IT expertise that you might not have or want to fund in-house. And it helps you take advantage of the value-based managed services that best fit your needs.
Strategy #4: Technology as a Service
Technology as a service, also called hardware as a service (HaaS) can be a very cost-effective way of shifting ownership of IT hardware from your business to a managed service provider. With this model, the MSP purchases the equipment (servers, routers, printers, and/or desktop systems) and installs what’s needed at your site. Rather than owning the underlying hardware and carrying those costs on company books, you only pay a service fee for the hardware services you need, and the MSP manages everything else (installing, monitoring, maintaining, updating, and end-of-life disposal).
“The significant loss the company suffered due to productivity and efficiency issues brought on by using outdated technology might seriously hamper the achievement of the company’s goals. The long-term profitability and scalability of the company are impacted. Medium-sized businesses without the IT staff or funds to maintain hardware every other year can find solutions to these issues with hardware as a service (HaaS).” Hardware as a Service provides a full package to organizations with the newest equipment, Dataconomy Media, November 2022
Strategy #5 Cybersecurity
Nothing can bring a company down faster than a successful cyberattack. Bad actors are at work 24/7 trying to find ways to infiltrate your IT systems and steal your data, and they’re having a great deal of success doing that. So it makes sense to bring in the experts to help you protect your valuable digital assets and those of your customers.
As cybercrimes become more sophisticated and increasingly difficult to stop, the likelihood that you will be attacked is high. Having adequate defenses lessens the chances that the attack will be successful. Having good backup and recovery plans means you’re less likely to suffer damage. And working with a highly skilled security partner can help keep you safe.
“Over the past twelve months, there has been a dramatic spike in cyberattacks against small businesses … accounting for 43% of cyberattacks annually, with 46% targeting businesses with 1,000 or fewer employees. Unfortunately, this trend is only going to continue in the years to come.” 51 Small Business Cyber Attack Statistics, Astra IT, June 19, 2023
Strategy #6: Cloud Computing
According to a recent executec report, “If you’ve been paying attention to the tech world, you know that cloud technology isn’t going anywhere. In fact, it’s becoming the technology standard for most companies.”
There are many benefits to moving from on-premises to the cloud—reduced costs, scalability, collaboration, and disaster recovery—to name a few. But there are risks as well. Your IT team might have decades of experience with your physical hardware but may be over their heads when it comes to cloud technology. Or maybe you don’t have an IT team at all. If you don’t find a way to bring the right expertise in, you could risk compromising your whole cloud migration.
So it makes sense for SMBs to work with a seasoned MSP that has a variety of cloud solutions and the expertise to manage them.
Reduce Costs and Tap in to the True Potential of Your Digital Investments
Digital transformation is not a one-time project, but more an ongoing journey that requires a mindset shift, smart investments in technology, new partnerships, and continuous adaptation to the opportunities and challenges of the digital age. No one knows what lies ahead, but you can reimagine your future and transform your business model in a way that cuts costs and creates value all at the same time. Following the 6 strategies laid out in this article will help you stay agile and make smart, well-informed decisions that take advantage of the new opportunities ahead, sidestepping pot holes, strengthening the core business, and setting your company up for long-term success.
“Digital leaders are defined as companies with a mature digital transformation plan where digital processes and mindsets are ingrained in the DNA of the organization.” State of Digital Transformation, TEKsystems
Put link to download the Recession article here [Small Business Strategy for Surviving an Economic Downturn].