Cut jobs or cut software spending?

New research from Insight has found there is a lot of waste in IT departments. Unnecessary expenditure on hardware and software licenses has a direct impact on the IT budget, especially as forecasts suggest budgets are highly likely to shrink next year.

Insight sponsored a Coleman Parkes survey of 550 IT decision makers across the UK, France, Germany, Austria, Switzerland, Italy, Spain, Belgium and the Netherlands, found that the majority of IT departments are being asked to cut costs. The survey, published in Insight’s Is IT failing the cost optimisation challenge? report, found that 30% of the IT decision makers who participated in the survey plan to cut jobs in 2021.

Discussing the challenges IT leaders face when assessing where to cut costs, Karen Mclaughlin, vice-president for Europe, Middle East and Africa services at Insight, said: “Cost conversations can seem like a negative. But if you control licence spend you can use savings to invest in people.”

Insight found that 66% of the organisations who took part in the survey had a large amount of duplicate hardware and software. According to Insight this has happened because, at the beginning of lockdown, they acquired more hardware and software to support the business.

The survey also reported that respondents are also cutting back on hardware and software upgrades and major projects. While almost a quarter of IT decision makers said they cut long-term projects since March 2020 during the first wave of the coronavirus pandemic, 28% plan to cut these major projects in 2021.

For Mclaughlin, stopping long-term projects, such as those with a return on investment (ROI) of three years or more, are the easiest to cut. She urged IT decision makers to look at their cost base and figure out how to get an ROI benefits earlier.

The survey points to IT departments unable to track IT assets effectively. For instance, Insight reported that 69% of the decision makers they surveyed are struggling to managing devices that people have bought themselves during lockdown.

Melody Ayeli, chair of the ITAM Forum, believes that IT asset management (ITAM) can enable IT departments to control costs and avoid job cuts. “The amount of money that ITAM can save is real, and if these savings are put directly towards job retention then many thousands of jobs can be saved. Even if the deployment of ITAM can save just one job in each company, that is a tremendous win for that employee, their family, the company and the wider economy too,” she said.

Martin Thompson, founder of the ITAM Forum, urged IT decision makers to tackling over licensing and shelfware costs, before embarking on any cost-cutting measures that involve job cuts or curbs on major IT initiatives. “Before you cut staff or projects, you have to cut out any fat, without impacting IT services,” he said, suggesting that an IT audit to identify old desktop software and unused software as a service subscriptions can often reveal that as much as 30% of the software a company pays for is redundant. “People find 15 times more SaaS than they expect,” he added.

The ITAM Forum recently launched the  #ITAMsavesjobs campaign, which makes the case that the minimum 5% savings that ITAM projects deliver year-on-year equates to potential savings of $67.7bn globally.

According to the authors of the Insight report, in order to optimise their costs, IT departments need to take control of licensing, asset lifecycle management and infrastructure. “Software licensing is an area of significant waste, but can also provide opportunities to optimise,” said the report. “Organisations should get control over what applications are being used where, by who, and how, and ensure they are putting pressure on their vendors to secure better, more flexible terms.

“Teams must also make sure they are looking at the additional assets that have come into the business, and update asset lifecycle management strategies to ensure the business can recoup the maximum value of any excess technology, while also planning for the future.”

But tracking software and hardware assets effectively, can be a major challenge for any IT department, warned Eric Chiu, co-founder and managing director of FisherITS. “Not many CIOs will look at software licensing when considering cost cutting,” he said, adding that in his experience, among the first areas IT leaders identify during cost cutting exercise is software asset management (SAM). “SAM budgets are cut all the time, which means organisations become less effective at managing software licences and finding where unused licences can be redeployed.”

Another challenge for IT leaders trying to innovate using smaller IT budgets is that the SAM teams tend to work in silos. This means that software licensing is not directly linked to areas of IT management like procurement, operations and new project work.