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Strategies to Save Big on Tech Costs

June 26, 2015 Tech4BusinessNow Article

How big is your annual technology budget? There’s a good chance you could be saving money.

By Andrea Holved

You may think of your business’s technology needs as fixed costs, but some small- and medium-sized business owners say they saved thousands of dollars a year or more by adopting some relatively simple strategies.

Here are some ideas worth sharing:

Do a technology audit

If you take the time to compile a list of your business’s annual technology expenses, you’re likely to find a handful of line items that can be eliminated immediately.

Ben Strackany, chief executive of digital product agency DevelopmentNow, in Portland, Ore. says he did just that. “It was surprising how various software-as-a-service (SaaS) subscriptions had sprung up over the past year for various needs, and didn’t get canceled in time,” he says.

Redundant services—such as the two online project-management software solutions they paid for—were also easy cuts to identify, Strackany says.

After getting rid of any redundancies, next look to see which services or products can be downgraded, reduced or consolidated. Do you need all 500 gigabytes of cloud storage you signed up for, or could you get away with the 30 gigabyte plan?

“In several cases, we were able to downgrade to a smaller plan or a smaller server—sometimes after archiving unused items—and save a significant cost,” Strackany says.

He also identified an opportunity to consolidate multiple websites and backend services onto a single virtual server, instead of paying for each of them to be hosted separately.

Although maintaining multiple virtual servers may be important to some business owners due to the improved reliability, Strackany says that unless your websites and services “don’t play well together” or are “100% mission critical” to your business, “spreading them out onto separate servers isn’t worth the cost.”

Negotiate discounts the smart way

Too often, business owners fail to ask a simple question of their vendors: Can you give me a discount? Whether you have a longstanding relationship or are a first-time customer, you may see prices drop simply by asking.

Both Strackany and Michelle Cocco, owner of Virtual Associates of the USA, have saved money for their businesses by asking for a lower price. Strackany says he asked for and received a “good customer” discount from two long-time vendors. For her part, Cocco says she’s received discounts and free SaaS accounts—even when she was a new customer—with multiple vendors. “You have to ask them,” Cocco says.

Still, while a simple question may yield results, artful negotiation means looking beyond price, says Margaret Neale, a professor at the Stanford Graduate School of Business who specializes in negotiations.

Don’t negotiate on just one item, she says. “If you get down to a single issue—like just price—it’s going to be a battle,” she says. “There’s no reason for me to be generous to you on that issue unless I get something in return.”

Instead, she says, consider which other aspects of the contract you can negotiate along with the price.

“Maybe it’s price and delivery; price and delivery and support; maybe it’s price, delivery, support, and upgrades—there’s all sorts of things you can keep adding to that discussion,” Neale says.

Whether it’s you who accepts less support in order to secure a lower price, or the vendor who offers free upgrades to make the original price a better deal, the issues on the negotiating table become “a package that you and your counterpart can fashion in a way where you get more of what’s important to you and they get more of what’s important to them,” Neale says.

Switch to free, open-source software

According to Austin-based IT consultant Sean Wingert, the biggest challenge faced by most of his clients is the inclination to buy expensive enterprise software. “Once you do that,” he says, “you’re kind of locked into their system.”

Wingert compares purchasing such software to purchasing a luxury car: even if you get a good deal initially, the upkeep will cost you. Software licenses need to be updated, and you will likely be restricted to buying only the compatible hardware—not to mention that the specialized consultants you’d want to hire for troubleshooting and development projects may charge a premium for their services.

But if you opt for free, open-source software (FOSS), Wingert says, “it would continue to be free this year, next year and when you upgrade.” All you need to pay for is hardware and development.

“That’s the upshot,” he says. “The ‘downshot’ is that you have to put it together.”

Scott Waddell, CTO of the fraud prevention company Iovation, says that it took his company about a year and a half to build the free, open-source stack they transitioned to from an enterprise database system in 2013.

“It required buy-in from our executive team, and some patience from our customers, but it’s really paid off,” he says. Not only has the switch saved money—Iovation’s recent ten-fold increase in system volume cost them just a fraction of the estimated $17 million price tag they were quoted by their previous vendor—but Waddell says their new system is a technical improvement, and that the cost savings freed up capital for investments in a more reliable data center architecture.

“I wouldn’t say it’s for everybody—you’ve really got to have the team,” he says. But if you do—or “if you’re trying to do something that lots and lots of people have already done,” Wingert says, and can find plenty of detailed instructions and forums on the Internet—taking advantage of FOSS could make a big impact on your bottom line.

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