This is a rough time for many businesses. Many customers are cautious to spend money, and as a result, sales and revenue are in decline. The future is uncertain. So as an IT director, how can you minimize costs before recession hits?
In a recent survey, 80% of CFOs responded that they expect COVID-19 to decrease their revenue or profits this year (cio.com). And 67% are prepared to lower costs in order to neutralize the negative effects of the virus.
Translation: It’s time to get serious.
Although your business might be struggling, there are still a lot of things you can do to prepare for a recession. By working together with your CFO and other department heads, you can find practical ways to cut costs and protect your organization. Here are a few ideas to get you started.
1. Clear Redundant Servers and Apps
Now is the time to eliminate extraneous software. Do you have multiple apps or programs that perform the same function? Are there applications being used by only a few employees that your organization could do without?
Take this time to eliminate unnecessary expenses by getting rid of things your company doesn’t need. This also includes excess hardware, like servers, and desktops.
2. Renegotiate SaaS Deals
SaaS prices are often based on specific metrics, like number of users, customers, or transactions. Most businesses are scaling back during this time, so see if you can use these low numbers to your advantage. For example, if you’ve signed a contract for a certain number of seats and you’re not using all of them, ask for a reduction in your contract.
As you ask vendors to lower your rates, keep in mind that the pandemic is affecting every business to some degree. When negotiating prices, always reiterate how happy you are to be working with your vendors and how grateful you are for their cooperation. Vendors are more likely to go out of their way for excellent customers. By showing them how much you value them and their services, you will incentivize them to work with you and provide for your needs.
3. Eliminate Excess Cloud Projects
In addition to eliminating redundant servers and apps, now is the time to remove any unnecessary projects and testing. Shut down developer sandboxes and innovations running in the background of the public cloud.
Anything that won’t help your business to survive during an economic crisis can be postponed to a future date or eliminated entirely.
4. Minimize Reserved Instances
Reserved instances can usually save businesses a lot of money. Basically, you’re paying to reserve a certain amount of resources and capacity for a particular zone within a region. When you purchase a reservation, you commit to pay for all of the hours during a 1-3 year term. In exchange, the hourly rate is reduced significantly.
While reserved instances are generally a good business strategy, they can cost you a lot of money if you end up not being able to pay for or use the hours.
Avoid purchasing reserved instances over the next few months. Additionally, see if you can negotiate out of any reserved instances you currently have. Waiting until the economy—and your business—are more stable will help you avoid losing money.
5. Add a Recession Clause
Most businesses are struggling through the pandemic, and a lot of organizations and vendors are offering relief to clients as a result. Contact your vendors about the possibility of adding a recession clause to your contract.
As part of the recession clause, the vendor agrees to lower the price of its subscription fees for a client whose revenue drops in a certain fiscal year. In exchange, the client agrees to extend the contract. Although the vendor is reducing short-term prices, the agreement will benefit both parties in the long run. You will experience relief in a time of financial stress, and the vendor will receive an extended time period with you as a customer.
In addition to working with vendors for lower prices, IT directors should be prepared to respond to clients who ask for the same thing. What better way to earn your clients’ trust than by offering them a recession clause upfront? Everyone is struggling as a result of the pandemic, and anticipating a client’s needs will remind them why they love doing business with you.
Take Action Now to Protect Your Business
This is a time of uncertainty, but there’s still a lot we can do to help our organizations succeed while serving our clients. By discovering ways to reduce costs, you can prepare your business now to survive and thrive in the coming months.
Here at CR-T, we take pride in providing enterprise-level IT services at prices that work for small businesses. Our team of experts can become your IT support department, responding to issues quickly, often before you even know about them. Covering everything from your servers and network infrastructure to your computers, workstations and mobile devices, we provide end-to-end solutions for all your technology needs.
Time and experience have helped us develop best practices and workflow procedures designed to keep your focus on your business, not your technology.
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