All departments in a business will likely be required to cut costs at some point. In tech, however, this can be especially challenging. You want to ensure you’re being frugal with your resources while not eliminating the essentials.
We asked a panel of Forbes Technology Council members to list some common cost-cutting mistakes that IT leaders should avoid. Their best answers are below.
1. Firing Employees After Automating A Task
Many IT leaders think automation tools are the answer to cost-cutting. But automation shouldn’t be used to replace valuable employees. Instead of firing employees when you implement automation software, you should switch the main focus of your team members to another important area to streamline your business even more and get projects done faster. – Thomas Griffin, OptinMonster
2. Not Getting Customer Feedback First
A major problem I see in tech cuts is the internal team deciding what can go and what can stay. With the increase of competition among markets, your customers’ loyalty is going to rise as your No. 1 priority in the upcoming years. Before making cuts, run them by a beta audience to make sure your customers are going to be okay with the changes. – Ben Lee, Rootstrap
3. Making Even Cuts Across The Board
The biggest mistake I see IT departments make is “peanut butter spreading” cost cuts. They just spread the cost cuts evenly over all the areas. That’s the lazy approach. Instead, decide your technical priorities, establish the technologies you have to have to meet those priorities and then take the full budget cut from the technologies that weren’t included in the “must-have” list. – Wes Wright, Imprivata
4. Cutting The Training Budget
IT departments, like all departments, need to devote some time and money for training. That includes buying books, tickets for conferences and courses that will help your people keep up with the fast pace of changes in technology. When your people are learning, your company isn’t just growing—it’s getting better and producing better results for the company. – Vaclav Vincalek, Pacific Coast Information Systems (PCIS) Ltd.
5. Choosing Cheaper, Lower-Quality Services
IT leaders often have to make tough decisions on where and when to spend their budget. When putting out an RFP, too many IT leaders make the common mistake of choosing the cheapest bid over the best bid. Doing this will almost always end up costing you more in the long run, and it almost always ends in disappointment and disarray. As the old adage goes, “You get what you pay for.” – Marc Fischer, Dogtown Media LLC
6. Reducing R&D Budgets
Tech thrives and grows through research and development. Unfortunately, R&D is always struggling to stay on the right side of budget cuts. It is important to realize that the fuel for the tech engines is R&D and it should be the last place you look at when cutting budgets. – Afshin Doust, Advanced Intelligent Systems Inc.
7. Failing To Consider The Time Costs
Cutting costs forces change—which is a process that doesn’t typically happen overnight. Therefore, the failure to not consider the time required can cause disruption to your team and further negatively impact the bottom line. Focusing on easily adjusted targets can keep the process streamlined and produce results more quickly. – Sanjoy Malik, Urjanet
8. Making Short-Sighted Cuts
To meet an immediate cost-cutting need, some IT leaders take a shortsighted viewpoint and ignore future near-term costs that arise as a result of this. A classic example is cutting maintenance contracts on critical infrastructure or software when a breakdown or downtime can cost much more to the business. Not thinking about business impact in making these shortsighted cost decisions is dangerous. – Pradeep Ittycheria, Kasasa
9. Failing To Replace Old Hardware Before It Fails You
Not replacing hardware when it should be replaced can be a costly mistake. It’s tempting to put off replacing hardware that’s old but still functional. But you’re much better off investing the money to replace it when you know it needs it but before it completely fails, because failures can disrupt business or cause other systems to fail as well. – Nina Vaca, Pinnacle Group, Inc.
10. Using Open-Source Solutions To Save Money
A mistake for IT leaders is in cutting software costs by opting-in to open-source solutions. Open-source software may not be as polished as other options and could end up being much more expensive and less efficient. Another common mistake I would recommend avoiding is hiring outsource companies to reduce costs. – Ivan Guzenko, SmartyAds Inc.
11. Reducing Cybersecurity
Many IT leaders are accustomed to cutting costs in areas that don’t have a return on investment. Cybersecurity is many times a victim of budget cuts due to the inability of leaders to prove the ROI, which is not seen unless an incident occurs. – Michael Hoyt, Life Cycle Engineering, Inc.
12. Switching To The Cloud
It’s a common and mistaken belief that the cloud will decrease costs for most businesses. Many a lift-and-shift project has been successfully completed, yet fails, due to a poor understanding of cloud costs and the complexity of hybrid cloud architectures. For most IT applications cloud is a valuable tool that solves hard problems well, but it’s not a final solution to capital expense costs. – Joe Gleinser, Trustgrid
13. Cutting Future-Focused Projects That Aren’t Contributing To Revenue Right Now
In my view, the biggest mistake that IT managers make is cutting down innovation and future-focused projects that are not contributing to revenue right now and that look like a present-day cost center. IT managers need to understand the value of technology innovation over the present-day struggle. Though not for today, innovation is highly essential for survival in the future. – Ankur Garg, Sonasoft Corporation
14. Outsourcing Everything
No question, the first common cost-cutting mistake IT leaders make is outsourcing. In the best case, they will build your stack fast and cheap, but the end product will be expensive to maintain and buggy. In the worse case, security will be overlooked and your company will be exposed to massive risk. If you are a tech company, own your products. Don’t cut corners—it will cost you more in the long run.