Insight Article: Budget Haircut – IT Budget Cuts in 2021 and Beyond

Introduction

For many organisations, 2020 and 2021 will be historic for all the wrong reasons. As a result of lost trading days during lockdown, ongoing employee health and safety concerns, and a slower than expected economic recovery, organisations are rightly scrutinising every pound they spend or plan to spend in the coming years.

With revenues by and large down, and uncertainty around the future trading landscape, CFOs will be challenged to make cuts in all areas of the business. One area that is traditionally top of the list when it comes to cost cutting is IT, and with network and telecoms usually being one of the highest spend areas it is likely to come under increased scrutiny at this year’s budget planning sessions.

Over the last couple of months, TNC has published a number of insight articles detailing various approaches to derive cost savings through processes such as audit and cleanse, benchmarking, and contract renegotiation. The focus of this insight article is to delve deeper into the technical strategies organisations could adopt to take out cost from the network and telecoms lines of the IT budget.

We will explore two main areas of network and telecoms spend:

Essential spend – Typically associated with core infrastructure, software and communication links
Discretionary spend – Typically associated with subscription services, upgrades and technology investments

Essential spend cost saving opportunities

Under normal circumstances cost cutting essential spend items has been difficult to achieve. If anything, services that fall into this category have increased in cost as the reliance and importance of service assets within this category rise. However, given we are no longer operating in normal circumstances, TNC believes there are a number of services, once classified as “essential” that could now be considered “non-essential”:

Enterprise Telephony

With the mass move to home working likely to be become the new norm for many organisations, the long-term requirement to retain an enterprise telephony platform is declining. Couple that with the steep adoption rate of UC and collaboration capabilities provided by the likes of MS Teams, Zoom, Webex, etc. then the reduction or complete removal of enterprise telephony platforms and the associated costs presents a good savings opportunity.

Network Resiliency

Traditionally, organisations have built fault tolerance or high availability into their network designs to ensure continuity of service in the event of a network component such as an access circuit, router or switch failing. Whilst this level of resilience is still important for critical sites such as data centres, and even call centres, the criticality at a branch level could now be deemed less important on the basis that branches are likely to be less populated and a ready-made continuity plan of working remotely is in place and continually being tried and tested. Although this opportunity is not applicable for all sectors, for the ones where it is, TNC believes this presents a significant possibility to reduce spend on network services

Bandwidth

In a similar vein to the opportunity to reduce the level of network resilience, reduction of committed network bandwidth on particular sites that have or will have reduced occupancy is another area where cost saving could be achieved. In many cases, turning down committed bandwidth could be a reversable process should plans change in the future. Therefore, TNC would view this as a quick win cost saving opportunity

Support Services

As a result of lower site occupancy, and alternatives ways of working, organisations could consider reducing the levels of network and telecoms support services it takes from third parties. TNC anticipates a number of approaches to achieve costs savings in this area:

Removing support for services completely. An example would be cancelling support for an enterprise telephony platform or branch LAN & Wi-Fi support service
Reducing the SLA. An example would be changing the level of service provided for particular service i.e. from a Platinum service wrap to Gold or even Silver

Discretionary spend cost saving opportunities

Typically the services that fall under the discretionary spend category could be seen as low hanging fruit and easier areas to realise costs savings than some of the essential spend areas. Here we will look at both the current and future aspects of discretionary spend:

System duplication

Over the last couple of years, TNC has helped many of its customers develop industry-leading network and telecoms strategies. One observation captured during the baselining process of our strategy development framework is that many customers have multiple systems carrying out similar tasks. A common example of this would be the duplication of network management toolsets. In most cases, small elements of multiple toolsets are used to manage the network. Although this approach may provide the desired outcome, the costs associated with managing and maintaining multiple platforms can add up. As the maturity and capability of these tools has increased in recent years, TNC often finds there is opportunity to consolidate the capabilities into fewer platforms thus reducing infrastructure, licencing and support costs.

Subscription services

In recent years we have started to see an increasing number of network and telecoms services begin to adopt a subscription-based model. In theory, the concept of this model provides lots of flexibility and control over usage and costs. However, in practice, TNC tends to see such services being badly managed with limited visibility or orchestration over what and how subscription services are being consumed. TNC recognises this is an area that, if managed correctly, can yield cost reductions. To support our customer base with this endeavour, TNC has recently enhanced its industry leading TEM offering to incorporate subscription expense management and is already seeing some great commercial results for our customers

Technology Investments

Perhaps the area which will be scrutinised more than any other will be planned technology investments over the coming years. Although investments such as replacing critical end of life infrastructure or improving security capabilities are difficult to challenge, other investments which were planned pre Covid-19 could be re-examined to establish if the benefits expected are still achievable and whether the investment will still deliver the anticipated ROI. This is not to say that investment in IT should be retracted altogether - on the contrary, many of the recent investments we have helped customers procure in technologies such as UCaaS, CCaaS, and cloud security services have hugely benefited customers by enabling them to continue to deliver high levels of operational service and in many cases at a significantly reduced cost.

Final Thoughts

Almost all organisations of different shapes and sizes have been impacted by Covid-19 in some way. For many, as a result of reduced 2020 and 2021 revenues, IT budgets are likely to receive a fairly significant haircut in the coming years. In previous insight articles TNC has shared its expertise, experience and tried and tested methodologies to help customers identify cost saving opportunities and access commercial leverage within the terms of their current contracts, their asset inventory lists and their network and telecoms billing utilisation. However, this alone may not cut the cloth, and deeper cuts to services previously categorised as essential may need to be considered. As always, TNC is on hand to help customers identify the opportunities and evaluate the risks and impact that could be presented as result of targeting these types of services. So, if you find yourself considering when and how to reduce your networks, telecoms, and/or mobility spend, please do not hesitate to contact us.

Disclaimer

Other than matters relating to The Network Collective, this research is based on current public information that we consider reliable. Opinions expressed may change without notice and may differ from views set out in other documents created by The Network Collective. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made.

This research does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice.

No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The Network Collective Limited © 2022

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