A 7-Step Guide to IT Cost Reduction in 2023

As per the latest forecast by Gartner, worldwide IT spending is projected to amount to $4.6 trillion in 2023, up by 5.1% from 2022. The demand for IT will be strong in 2023 as enterprises launch digital business initiatives to respond to global economic challenges.

In a downward economy, conventional wisdom warrants reducing costs. However, as per a Gartner survey from July 2022, 69% of 200 CFOs plan on increasing their spending on digital technologies, while CIOs are tasked with accelerating time to value on digital investments, as per the 2023 Gartner CIO and Technology Executive Survey.

So, instead of cutting IT costs in 2023, companies will focus on optimizing IT, increasing productivity gains and rooting out inefficiencies in IT as a means to plug in cost leakages from IT.

More and more organizations are waking up to the fact that IT is no longer a back-of-the-house operation but a front-of-the-house machine enabling innovation and digitization in modern environments.

In such conditions, how can organizations optimize IT costs in 2023? Let’s find out.

Why IT Operations Might Cost More in 2023

  • Decidedly complex IT environment
    The modern IT infrastructure is dynamic, diverse and elastic. It enables optimized user experiences with multi-cloud, hybrid-cloud deployments, containerized workloads and serverless computing capabilities. 

    A modern organization can easily have a dozen or more monitoring solutions for every corner of its IT infrastructure, increasing costs and complexity further. Poor KPIs such as MTTR (mean time to repair), MTTI (mean time to identify) and MTTD (mean time to detect) lead to cost leakages, making IT expensive.
  • The dire need for robust cybersecurity
    The pandemic pushed businesses into panic mode with the sudden migration to remote work. Business continuity was the top priority. As a result, cybersecurity arrangements fell behind, and cyber criminals cashed on the opportunity.

    Phishing, insider attacks, business email compromise, lack of cybersecurity personnel and code misconfigurations were the risks businesses grappled with. IT operations will need to shoulder the burden for more robust cybersecurity in 2023, increasing costs from disruptive technologies and modern cybersecurity solutions.
  • Scarce and costly resources
    The pandemic unveiled supply chain weaknesses. The semiconductor shortage is an example of scarcity many industries face today in the aftermath. Many factories are maxed out despite inflated prices.

    IT costs will go up in the coming year if you’ve postponed equipment lifecycle management activities or need replacements. Human resources in IT are also getting scarce and expensive. Companies must focus on talent retention in these trying times to suppress costs.
  • Technical debt coming up due
    Technical debt exploded in the wake of the pandemic as organizations rushed technology adoption to stay in business. Higher technical debt results in lower IT resilience and more expensive IT.

    In 2023, companies will need to budget appropriately to correct technology in a planned way that doesn’t impact productivity by implementing bug fixes, software updates, asset replacements and process documentation. Companies hesitant to invest in systems to reduce technical debt can leapfrog to automation of IT operations through AIOps to alleviate resource shortage and human error.
  • The cost of inefficient IT operations
    Inefficient IT operations cost businesses dearly, directly and indirectly. When IT operations aren’t automated, optimized and future-proofed, organizations run the risk of cyberattacks, poorly utilize IT resources and get stuck in the day-to-day operations of putting out fires, not leaving room for innovation.

    AIOps can help unify operations, save time and resources and optimize the critical KPIs- MTTI, MTTD and MTTR. Moreover, AIOps and observability can lead to revenue optimization and business growth.

Gartner’s Decision Framework for Cost Optimization

Gartner’s decision framework for IT cost optimization is based on six pillars or questions to ask. Each of the pillars is explained below:

  1. Potential Financial Benefit – How will a particular action affect cash flow and generate savings? What will be the degree of impact- small, medium or large?
  2. Business impact – What impact will a particular change have on the day-to-day operations, either positive or negative?
  3. Time requirement – IT cost optimization is a long-term strategy. When will you see the impact of a cost-optimizing move? What will the impact be? What is the timeline of the change?
  4. Degree of organizational risk – Optimizing IT costs is a trade-off. What will be the impact of certain changes on the company and how ready are you for the potential risks?
  5. Degree of IT technical risk – What impact will a cost optimization initiative have on technical architecture and processes?
  6. Investment requirement – IT cost optimization also warrants an investment of time, money and attention. Are you aware of the investment necessary to realize IT cost savings?

With this cost optimization framework in mind, let’s see seven critical strategies you can use to optimize your IT costs in 2023.

7 Strategies to Optimize IT Costs in 2023

Gartner’s 2022 Planning Guide for IT Operations and Cloud Management mentions ways to optimize IT costs.

  1. Align automation approach with use cases to minimize technical debt
    IT automation can take many forms and scales, such as automating ticket assignments to the right employees through automated incident management or using AIOps to automate the length and breadth of IT in an organization.

    A way to optimize IT costs can be to correlate use cases with existing automation, find gaps and lay down automation strategies to cover them. Business constraints, such as time to market, can sometimes create suboptimal implementations, leading to technical debt.

    So, it’s important to lay down realistic KPIs and metrics to measure the success of automation implementation.
  1. From infrastructure-centric to customer-centric operations (observability)

    Observability isn’t the same as monitoring, but the state of an IT infrastructure if it is monitored sufficiently so that issues can be discovered and resolved before they impact business processes.

    Shifting from an infrastructure-centric to a customer-centric mindset can help deal with the dynamic nature of IT assets and their monitoring tools. Telemetry can often go out of hand or be out of reach in the modern IT environment, leaking money and time.

    A combination of AIOps tools and data-centric strategies can help save IT costs in the long haul with sufficient observability.
  1. Capture immediate value from AIOps

    AIOps can augment human labor with artificial intelligence and automation, allowing businesses to keep an eye on their IT infrastructure without engaging useful talent. AIOps implemented with the right strategy can supplement multiple teams- DevOps, SREs and ITOps.

    Immediate value can be captured from AIOps by discovering topology and dependencies automatically, enabling observability, automating incident response, monitoring user experience, and leveraging data-centricity to lead to predictive remediation. 
  1. Enhance self-service, autonomy and decentralization with governance and ITSM

    IT management core practices are still relevant in the era of the distributed enterprise. However, different pipelines, workflows and endpoints must be included under the purview of IT management.

    Organizations can achieve this through governance principles and programmatic controls to enforce them, policy-based governance and mature ITSM practices to reflect the reality of the digital business. To optimize IT operations, organizations must automate incident management, enable self-service and autonomous IT, and reduce incident volume and impact.
  1. Automate incident management

    Labor-intensive IT support is expensive and inefficient against the fluctuating and critical demands placed on IT teams in chasing innovation and disruption. Manual incident management poses the risk of excessive downtime, proving costly.

    Organizations must automate incident routing, response, triage and resolution using AIOps. AIOps can automatically respond to high-volume tasks and recurring incidents so that IT teams can focus on the truly mission-critical incidents with enough context and help from AI.
  1. Balance speed of innovation with IT risk management

    It’s a tale as old as time that leaders in an organization want a certain pace of innovation that can be hard for IT operations to match. Any change or disruption requires IT management or could otherwise prove expensive. Too restrictive IT governance can hamper progress, while hasty innovation can pose an organization risks over its threshold.

    To optimize IT costs, organizations must balance IT with innovation by leveraging automated dependency mapping to discover relationships between systems, applications and infra so that the impact of a change can be assessed and managed. Companies can also automate change reviews to accelerate change management while containing risks.
  1. Judiciously use IT Ops teams

    Human resources contribute a lot to an organization, so it makes sense to use this valuable asset judiciously. Research and surveys suggest that IT workers are prone to work exhaustion and burnout due to the unique nature of their working environment.

    In order to optimize IT costs going into 2023, it’s critical to take note of where your IT employees stand on wellness and productivity and to take necessary steps to address concerns, if any.

Related: Robotic Data Automation (RDA): Reducing Costs and Improving Efficiencies of your Log Management Investment

Srinivas Miriyala
Srinivas Miriyala
https://www.linkedin.com/in/srinivas-miriyala-8428267
Srinivas Miriyala is the Director Product Marketing & Business Development at CloudFabrix Software. He has over 20+ years of product and business development experience, with 10+ years in leadership roles spanning Enterprise Software, Mobile and Telecom industries . Srini holds three US patents and has global experience working in U.S, Europe & Asia markets building strategic partnerships and rolling out products through System Integrators, carriers and device manufacturers. His current role involves driving AIOps product messaging, GTM strategy development and execution for the Europe and APAC markets. https://www.linkedin.com/in/srinivas-miriyala-8428267