Part two of this two-part series continues to explore technology expenses and strategies for budget season. In part one of technology expenses, we discussed the importance to review your technology partner agreements and telecommunication expenses. Part two focuses on finding savings in Cloud Services, the benefits of a hardware refresh program, and to capture Shadow IT costs. So, let’s start.
Cloud service providers have made spinning up a web service or creating a virtual private server very easy. So easy, you will be surprised to find extra expenses from unused services. The team should perform quarterly audits to archive and remove unused services.
One word of caution, turning off a web service or virtual server doesn’t stop it from incurring expenses with your cloud provider. As an example, I had a non-active Microsoft SQL Server configured in Azure. Keeping this non-active server was still incurring a $142 per month cost for licensing, disk storage space, and for the space given to the server. Yes, I did archive the instance and dropped the server from my account.
Software as a Service (SaaS) cloud services such as Dropbox, HootSuite, Google G-Suite, Microsoft Office 365 and many other services are another area to review during budget. The goal is to research usage rates by the users. Determine if the number of subscription licenses match to who is using the service. This exercise always finds cost savings. It is not uncommon for the business to be able to eliminate unused services.
Hardware Refresh Program
While IT has moved most of its server hardware to the cloud, there are plenty of other technology that is still very local. We have networking infrastructure and computing devices for managers, staff, floor, conference rooms and for some brokerages, workrooms. Hardware replacement is a must, due to the limited lifetime usefulness of the device – which is between 3 and 5 years – and if the company records hardware expense as capital or operational expense.
I have seen several brokerages set their fixed asset policy for minimum capital expense between $1,500 to $2,500 dollars. This places all computer and some networking equipment into the operational expense budget.
Why is this important?
I eluded to this earlier — market downturn protection is a strategy. Anyone who has been in real estate a long time will have no problems telling you that the market is cyclical. We are now in a good cycle and it will eventually turn. Set a strategy to be prepared.
I was fortunate to work for a brokerage who did believe in owning its technology. When the market was good, the hardware refresh program was in place and keeping the technology current. When the market turned south, we were able to delay the refresh program and only incurred expenses on replacement of non-repairable hardware.
Shadow IT Technology Expenses
If you haven’t heard of Shadow IT, you are not alone as many people are in the same boat. Shadow IT as defined by Gartner is:
IT devices, software and services outside the ownership or control of IT organizations.
Shadow IT has been around for some time. Why it has flourished inside organizations is because of the advent of SaaS and other cloud services. Divisions within the organization have easy access to subscribe to use services such as, Dropbox, personal Google One-Drive, HootSuite, Slack and many others, which are outside the purview of IT.
Why is this so important to review during budget season?
Shadow IT technology expenses are found in areas such as:
- remediation of security breaches and regulatory compliance due to loss of control of data
- divisions investing time and effort into the wrong solution and need IT aid to mitigate
- overpaying for licenses
- the added strain these services may have on your network.
What is the solution to wrap some control and policy around Shadow IT?
There is a new classification of products and services which can expose and manage Shadow IT, Cloud Access Security Brokers (CASB). CASB products and services have been growing since 2011 and its importance escalating when Gartner announced the CASB Magic Quadrant in November 2017. This may be a new expense depending on the size of your brokerages and the depth and breadth of its Shadow IT.
As we all head into budget season, I am sure there are other technology expenses that are more important to your organization. I recommend using this corporate calendar event as an opportunity to take a step back in reviewing all things related to technology. Not only will it help to develop a more strategic budget but show the most important parts of the budget that affect the company’s bottom line.