If you have been following the news, you might have heard about inflation. Every industry is on the receiving end of inflation and IT is no exception. This rising inflation is not only impacting the cost of hardware, it is also impacting operational cost as energy prices are also skyrocketing. Apart from that, labor costs are also going up.
Combine that with a talent shortfall in the IT industry and the great resignation and IT leaders have their work cut out. This means that businesses will have to work even harder to find the right talent and then retain that talent in order to stay competitive in today’s highly competitive market.
With IT budgets shrinking or staying flat and inflation making lives extremely difficult for CIOs, how can IT leaders get over this issue? By understanding how inflation is impacting IT and what steps they can take to overcome it. In this article, you will learn about how rising inflation can impact the information technology department of your company and what you can do to fix it.
How Inflation Will Impact Information Technology?
Here are six ways in which inflation is negatively impacting IT departments.
- Rising Labor Costs
The demand for skilled and experienced technology professionals will remain high but the supply is scarce. In the month of April, we saw 40% more job openings for IT professionals when compared to the same period in 2021. You can see the same trend worldwide.
Whenever there is a massive demand and limited supply of something, its price tends to go up and IT professionals are no exception. The talent shortfall prevalent in the IT industry and hundreds of thousands of job openings means that IT professionals can demand higher salaries. This pushes the labor costs higher for businesses as they have to hire IT professionals at much higher salary. Add to that the perks and training and development opportunities and it will push your IT labor costs through the roof.
Tech giants and large scale enterprises can afford to pay big salaries and perks but what about small and medium sized businesses. They are not only struggling to find the right IT talent but also finding it difficult to retain them.
- Increase In Contract Costs
Your business is not the only one facing inflationary pressures. Your vendors, software providers, suppliers and other stakeholders are also dealing with similar challenges. This means that they are more likely to increase their prices as well. Some IT leaders are experiencing a 25% increase in contract costs when compared to last year.
Even though CIOs are trying to negotiate a better deal with their current vendors, if it does not work out, they will have to switch to a more affordable vendor. If you have not faced such issues until now, you might in the future as it is just the beginning of price increase by tech vendors. In short, you should expect your contract cost to rise and must allocate some funds or create a buffer in your IT budget to deal with those price fluctuations.
- Higher Operational Costs
Whether you are ordering a workstation or cheap dedicated servers from abroad, you might face some delays due to global supply chain disruptions. When you don’t get your products on time, it creates a backlog, which not only negatively impacts your business progress but can also impact costs. The skyrocketing oil and energy prices are also taking its toll on your overall IT bill.
If you are managing your on premise cheap dedicated server hosting, you might have to pay a higher cost in future. The rising energy prices will eat through your profits and raise your operational expenses drastically. This can make it difficult for your business to stay afloat so you are better off looking for alternatives such as cloud or outsource your IT to a managed service provider like Singapore Vps. This way, you can not only save up on hardware costs but you don’t have to worry about operational and maintenance costs as well.
- Premium Prices To Gain Instant Access
As more and more businesses move away from remote work and either adopt a hybrid work model or ask their employees to return to work, they will have to procure equipment for it. As businesses demand instant delivery, vendors and logistic companies can charge a premium to ship products immediately due to supply chain issues.
Yes, you might argue that you should not blame inflation for it and you are right. There are many different factors that are playing a rule in it. COVID-19, lockdowns, manufacturing plants shutdowns, supply chain disruptions are all making their contribution to make the situation worse.
IT leaders might wait instead of paying the premium to get their products shipped to them instantly due to financial constraints. CIOs of large scale enterprises might have an edge as they can afford to pay the premium to get products early, which can put them one step ahead of their smaller rivals. look out for more business related articles only on Skillmachine.
- Keep Demand In Check
In tough times like this, it is important for IT leaders to rethink their priorities and adjust according to the changing situation. Instead of going forward with all the IT initiatives, you need to prioritize critical initiatives and leave the rest on the back burner to keep the costs under control.
Which IT initiatives will help you achieve your organization goals and which ones are not? By asking this question you can easily decide which IT initiative to pursue and which ones to postpone. It is high time that you recalibrate your product and service portfolio. Instead of pushing your team too hard, it is important to focus only on strategically important IT projects.
- Make Smart Technological Investment
Some IT leaders are taking a completely different approach. They are speeding up their transformation initiatives to lower their costs. If you are one of them then it is important to make sound technological investments. Focus on value, innovation and efficiency when making technological investments. If a technological solution deliver more value to your business, increases your productivity and efficiency and minimizes your risks, you can invest in it.
How does the soaring inflation impact your IT department and what you are doing to minimize its impact? Share it with us in the comments section below.
