- 8 Aug 2011
5 Top Tips for Reducing IT Expenditure
According to a recent Martec International survey of the UK’s top 100 retailers, their IT budgets have fallen to an all time low. The typical retail IT budget now stands at 1% of sales, compared to 1.1% for the previous two years, and 1.3% for the four years before that.
For retailers, technology may be essential to run their businesses, but in most cases it is not, in fact, their business. In view of that, here are my five suggestions for retailers to help get things moving:
1) Find out what you are actually spending your money on.
2) Consider what’s changed since those spending decisions were made (falling turnover).
3) See which IT costs are truly fixed, sunk costs or variable (experience suggests IT is best seen as a ‘semi-variable cost’ with diverse elements ranging from hardware that depreciates year-on-year to internal Service Desks).
4) Think about the business needs or operational requirements driving those costs, and if they have changed.
5) Explore opportunities for change, and include your overall business strategy and objectives in your plans.
Let’s use a Service Desk as an example: actually a variable cost. A reduced retail estate following store closures or, say, or a reduction to six days in trading suddenly means your requirement for a fully resourced in-house Service Desk suddenly goes down.
You can then explore moving to a new cost management model, which could mean changing how you run things in-house or looking to outsource some or all of that function, maybe using the economies of scale offered by a ‘shared services’ provider. The choice is yours but action will be required to drive lower costs.
Of course, requirements can increase too. For example, in the face of falling high street sales you might want to focus on online sales driven by, say, special advertising promotions or customer incentives. Here, you could suddenly require more Service Desk resources and capacity than previously. With the future uncertain, you need to be ready.
Are you a retailer whose budget has been cut, or have you already managed to successfully reduce your IT costs? Please share your thoughts below.