How CIOs can Stay Ahead of Inflation

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In a recent survey conducted by Info-Tech, two-thirds of CIOs interviewed expect their budgets to increase in 2023, however, many of these increases may not keep up with inflation. Even with a budget increase of 6.5% in IT for 2023, that makes for an effectively flat-funded budget cycle in 2023.  

Yes, inflation is a common challenge that all organizations face, and IT departments are no exception. With the cost of goods and services increasing every year, IT operational spending needs to be adjusted to ensure that the department remains within budget and continues to deliver value to the organization and to their clients. 

The Centre for Economics and Business Research (CEBR) is predicting a global recession has already begun in 2023. This means IT leaders must use every trick in their arsenal to ensure their precious IT budget dollars go further in this year and well into 2024. Here are some tips for adjusting IT operational spending to manage for inflation: 

  1. Review your current spending: Before making any changes, it’s important to have a clear understanding of where your money is currently going. Take a close look at your IT budget and identify areas where you think you can make cuts or reduce spending without compromising on quality. Auditing your IT budget can be an area where partnering with an outside firm may be warranted. Many IT consulting firms provide this as a service because it can be a complex project depending on the organization, and there are tools on the market that can break down an organization’s financials, identifying what current IT spend is directed towards, categorize it by type, vendor, and more. While the process itself can be hard to wrap one’s arms around, it pays dividends in the long-term, so if you feel like you need help getting your arms around where you spend today, there are plenty of resources to seek help from.  
  2. Prioritize spending: Once you have an idea of where your money is going, it’s time to evaluate whether it’s providing enough value to your organization. After all, not all IT spending is created equal, and it’s necessary to prioritize spending on initiatives that directly impact the organization’s bottom line or help achieve strategic objectives. When times are good, we often add on new projects that may be nice to have rather than mission critical, but by taking the time to review all projects in flight and those planned, we can assess which parts of our strategy can be altered to meet the business needs of today. Review the project charters and make sure you understand the value and return on investment and prioritize accordingly.  
  3. Consider cloud solutions: Cloud solutions can be a cost-effective alternative to traditional IT infrastructure. They can help reduce capital expenditures and eliminate the need for expensive hardware and maintenance. Alongside reducing expenses, investing in cloud-based solutions can have a significant impact on your organization’s ability to deliver value to your customers on a level that’s competitive with your industry. Advances in AI and cloud-based tools are changing the way data is stored and analyzed, servers are kept safe, users are verified, remediation plans are implemented, and more, allowing operations to be streamlined without devoting massive resources to do it. With all these changes, even businesses that have modernized their operations with cloud solutions and software previously could start lagging behind if they don’t stay on top of the latest developments. 
  4. Talk with your partners: Don’t be afraid to negotiate with partners for better pricing or terms. While it may not be common for customers to negotiate the price of eggs at the grocery store, businesses looking to invest in new solutions or renewing existing licenses can often access special pricing for services as diverse as collaboration platform licensing, cloud hosting, and more. Many vendors are willing to work with customers to reduce costs and maintain a long-term relationship. 
  5. Invest in automation: Automation can help streamline IT operations, reduce costs, and increase efficiency by reducing or eliminating the routine tasks of your people in their daily workflows. By investing in automation tools and platforms, you’ll be able to free up IT staff to focus on more strategic initiatives that will drive your business forward. 
  6. Plan for future inflation: While everyone hates the way costs increase every year, inflation is a fact of life, and it’s important to plan for future increases in costs. Build in a buffer for inflation when creating your IT budget and regularly review and adjust spending as needed. Inflation is a never-ending cycle. IT leaders should be planning for inflation and other ancillary global, regional, and local factors in their budgets.  

Managing IT operational spending in the face of inflation requires a careful balance of priorities, cost-cutting measures, and strategic investments. By taking a proactive approach and implementing these tips, IT departments can continue to deliver value to the organization while staying within budget. Lastly, it is critical that leaders communicate with their team, vendors, and partners to make sure everyone understands the decisions that are being made. Effective planning, smart IT investing, and a reshuffling of priorities and planning, often gets confused with much more serious thoughts of organizational financial crisis.  

Interested in finding out more about how to protect against rising costs? Check out Three Ways Companies Lose Money they may not know about.