IT Cost Reduction Strategies: 3 Unexpected Ways Enterprise Architecture Can Help

Organizations are accumulating heftier and heftier technology stacks, so unsurprisingly, IT cost reduction has become a high priority for many technology leaders who are challenged to improve cost-effectiveness. It’s a challenge that only grows with an organization’s scale, fuelled by the rise of business technologists and shadow IT.

However, organizations can’t just start slashing IT budgets based on the numbers alone. They need insight into what their technology supports and where critical interdependencies exist. Enterprise Architecture (EA) helps improve the decision-making process on IT cost efficiency by providing a single source of truth on the business.

See how Ardoq can help you quickly overcome IT complexity and cost inefficiencies.

Jump to: 

• What is IT Cost Reduction?
• IT Cost Reduction Strategies
• 3 Ways Enterprise Architecture Helps With IT Cost Reduction 
• 10 Top Tactics For Rapid IT Cost Reduction
• Key Takeaways on IT Cost Savings Using Enterprise Architecture
• Save Time on IT Cost Reduction With Ardoq

What is IT Cost Reduction?

IT cost reduction is the application of strategies within a business or organization to minimize technology expenses. The aim is to reduce costs while also maintaining or improving business performance.

IT Cost Reduction Strategies

Organizations can generally take three main approaches to reduce IT costs: divesting, reducing consumption, and renegotiation. 

1. Eliminate

Examples of cost-bearing assets that can be divested are applications or data centers. This could also include changing capital expenditure into operational expenditure by replacing an asset with an equivalent service.

2. Reduce Consumption

An example of a service that can be controlled this way is cloud hosting. This has also led to many organizations embracing IT Business Management (ITBM), a chargeback system for internal services. This approach results in an "IT Utility Bill" that is issued to business units on a regular basis. However, ITBM can be challenging to implement, with a lot of effort going into reconciling IT spend with other expenses. Agreeing on cost allocation with the consuming business units can also be challenging. Some organizations rely on external providers for this service, but that also introduces higher levels of risk as they are not as easily governed.

3. Renegotiate

This heavily leverages existing relationships with an organization’s suppliers and may not be possible for some organizations depending on how much is outsourced. 

3 Ways Enterprise Architecture Helps With IT Cost Reduction

Most businesses will resort to eliminating or reducing IT assets as much as possible. To make the most of minimal effort, organizations may be tempted to see which applications are easiest to trim down or ax from their ecosystem based on estimated users or ongoing costs alone. However, merely cutting costs without a real understanding of the impact this will have on processes is a cost management exercise in futility.  

Enter Enterprise Architecture (EA).

Of course, the sword is only as good as the master that wields it, and a digital-native Enterprise Architecture platform is hardly a cure-all in and of itself for bottom-line woes. However, equipped with the right questions and a clear strategy guided by those questions, EA becomes a powerful tool for insight into more strategic IT cost optimization.

Here are 3 key areas that Enterprise Architecture can help you reduce IT costs. 

1. Cost Cutting IT: What Are Your Organization’s Applications and What Do They Cost?

The first step should always be to know what needs to be added. Just approaching IT cost-cutting from a financial insight fails to account for the criticality of systems, regardless of their cost. Through Application Portfolio Management (APM), Enterprise Architecture can help an organization piece together a confident overview of a business’s application landscape and costs, the organizational needs those applications fulfill, and insight into who owns these applications.

With a traditional process, the IT department would need to combine hundreds of data sources, interviews, and survey data manually to develop this overview. Processing, profiling, and scoring of applications would also be done manually. There would be no convenient way to visualize their findings and the relationships between applications, people, and processes, so they would then need to map this using presentation software such as PowerPoint. Aside from being ineffective with time and manpower, the findings from this documentation process would also be static, which means that even after this weeks-long project, the organization would still not have an up-to-date understanding of its application landscape.

New data-driven Enterprise Architecture Management platforms like Ardoq come with best practices and an out-of-the-box Application Portfolio Management solution. This solution is designed to speed up an organization’s time-to-value, often including guides, templates, and best practices drawing on industry experience. It enables businesses to spend less time chasing users for information and more time deriving valuable insights from the latest data. Once the application landscape is documented, then EA teams can really get moving on where money could be better spent.

2. Keep Things Lean: How Your Organization Can Reduce IT Expenses Based on EA Insight

Once there is a clear picture of the applications an organization actually owns and who manages what, the business can effectively tackle Application Rationalization. By definition, Application Rationalization is the ongoing process of assessing an organization’s application portfolio and strategically deciding which applications should be kept, replaced, retired, or merged. These decisions are generally made based on an application’s business value, its technical and functional fit, and cost.

Traditionally, this is done through analysis in spreadsheets or similar to find rationalization potential based on the data gathered earlier. We have found that it could take approximately two months for an organization to finally arrive at the point where low-value assets are identified and ready to be managed out of the ecosystem.

With a digital-native EA platform like Ardoq leveraging data-driven insights, businesses could get a better understanding of where investment should be increased and what needs to be phased out in half the time. Automating data collection and consolidation also greatly expedites the documentation process. If correctly set up with regularized updates and integrations for real-time data pulled from an organization’s key platforms, an EA platform will be working off information that is always up-to-date, unlike the traditional process. Some new EA platforms also come with supporting tools for analysis and visualizations based on the data put in, doing away with the need for other platforms.

Gartner estimates that CIOs who standardize and rationalize their application portfolios can save between 15-25% of their application budget. We have seen that a mid-sized company could save $0.5-1 million annually in application portfolio costs alone. The more efficient analysis process could also save approximately an additional $150 thousand.

3. Sustainability: How an Organization Can Continue to Keep This Process Effective And Timely

Once this foundation of a well-documented application landscape is available, what’s next? Keeping it that way with effective governance and maintenance.

Easier said than done with the traditional process of manual follow-ups hampered by inconsistent documentation often scattered across many teams. The issue with documentation also often means that maintenance efforts are duplicated, wasting resources that could have been better deployed elsewhere. The result is the equivalent of around 3 hours of a dedicated employee’s focus per application per year spent on documentation, governance, and maintenance.

Not so for the organization that has a digital-native EA platform that leverages your data to enable scalability and automation in workflows and messaging so you can reach out to the most relevant people in your organization when it's most needed. Features like these can save an immense amount of time otherwise spent identifying the right people to talk to and when to reach out to them, making a company's Enterprise Architecture the single source of truth and a solid foundation for effective governance.

The result is a reduction of approximately a third of the time usually needed to achieve this. That valuable time can then be reallocated toward other, more strategic work within the organization. We have seen that a mid-sized company can save approximately $70 thousand annually by reducing its documentation and governance time.

10 Top Tactics For Rapid IT Cost Reduction 

When an organization has a clear overview of its technology landscape, it then has the insights necessary to start identifying quick wins and cost savings. Here are 10 tactics that can be deployed to improve and reduce IT spends.

1. IT Lifecycle Management

IT lifecycle management can reduce IT costs by ensuring that technology assets are effectively maintained, upgraded, and decommissioned at the right time. This approach prevents over-investment in outdated systems, reduces maintenance expenses, and optimizes resource allocation, leading to lower operational costs and improved asset utilization. Ardoq offers an out-of-the box IT Lifecycle Management solution based on expert guidance to expedite the process.

2. Cloud Migration and Optimization

Cloud migration and optimization, guided by EA insights, can help with reducing IT costs by identifying the most efficient cloud services, avoiding over-provisioning, and ensuring resources align with business needs. EA helps streamline the migration process, minimizing downtime, reducing legacy system maintenance, and optimizing cloud usage for long-term cost efficiency. Ardoq’s Cloud Migration solution helps businesses avoid common migration planning pitfalls and speed up their way to savings.

3. Vendor Renegotiation

EA insights help businesses better understand actual technology usage and dependencies. This enables more effective contract negotiations, leveraging data to secure better pricing, volume discounts, and optimized service agreements, ultimately aligning vendor costs with actual business needs.

4. Infrastructure Consolidation

With a clear overview of technology provided by EA, businesses can identify redundant or underutilized systems and resources. This helps inform streamlining and centralization of infrastructure, optimizing hardware, software, and network usage, which leads to lower operational, maintenance, and energy costs while improving overall efficiency and performance.

5. Software License Optimization

Insights from Enterprise Architecture help optimize software licenses and Application Lifecycle Management by providing a clear overview of software usage across the organization. This enables the identification of underutilized licenses, opportunities for consolidation, and elimination of redundant software, ultimately reducing licensing fees and ensuring alignment with actual business needs.

6. Outsourcing Non-Core Activities

With data-driven insights from their Enterprise Architecture, organizations can identify non-core activities or low-value business capabilities suitable for outsourcing. By offering a clear view of operations and resource allocation, EA enables data-driven decisions on outsourcing, helping reduce labor costs, enhance efficiency, and ensure strategic use of internal resources.

7. Automating IT Processes

Insights from a data-driven EA platform like Ardoq identify repetitive, resource-intensive IT processes ideal for automation. By mapping workflows and dependencies, Ardoq helps organizations streamline operations, reduce manual efforts, and lower labor costs, ultimately increasing efficiency and enabling more strategic use of IT resources to drive cost savings.

8. Energy Efficiency Initiatives

Similar to insights on IT infrastructure and consolidation, a data-driven platform like Ardoq also allows input of other factors, such as energy usage by department or location to better understand ongoing IT costs. By connecting this information on energy consumption to people, process, and technology, organizations can potentially identify opportunities for improving energy efficiency.

9. Shadow IT Governance

EA also helps provide visibility into unauthorized or unmanaged shadow IT systems. By identifying and governing these hidden assets, the Ardoq platform can help businesses eliminate redundant tools, reduce security risks, and consolidate technology, leading to reduced IT costs and improved operational control.

10. Employee Training and Upskilling

Employee training and upskilling can also help reduce IT costs by empowering staff to handle advanced technologies and in-house tasks, minimizing the need for external consultants. Improved internal expertise also increases operational efficiency, reduces errors, and optimizes resource usage, ultimately lowering costs associated with outsourcing and technology management.

Key Takeaways on IT Cost Savings Using Enterprise Architecture

1. Know what you don’t know, so Application Portfolio Management helps you get that critical overview of your application landscape.

2. Enterprise Architecture equips a company with the insight to invest, downscale, or divest applications that aren’t adding value to the organization through Application Rationalization.

3. A data-driven and digital-native Enterprise Architecture platform can make ongoing governance of an application landscape quicker and easier through automation and crowd-sourcing.

Save Time on IT Cost Reduction With Ardoq

Saving time and money are critical wins for any organization, but the value of a data-driven EA platform like Ardoq extends beyond immediate cost savings. By providing real-time insights into the IT landscape, Ardoq empowers organizations to make better-informed decisions, optimize resource allocation, and eliminate wasteful spending—all while fostering agility.

With Ardoq, businesses can proactively identify inefficiencies, streamline processes, and prioritize IT investments that align with strategic goals, ultimately driving continuous improvement and long-term financial health. The Ardoq platform simplifies complex data management, giving EA teams more time to focus on innovation and delivering value.

Learn how we help businesses embrace change and how some of our customers have experienced ROI with us. Start your journey toward smarter IT cost management and sustainable growth with Ardoq.

FAQs About IT Cost Reduction

How Can Enterprise Architecture Help Reduce IT Costs?

Enterprise Architecture (EA) provides a holistic view of an organization's IT landscape, enabling the identification of inefficiencies, redundant systems, and opportunities for optimization, leading to significant cost reductions.

Can EA Help Prioritize IT Investments?

Yes, EA helps prioritize IT investments by aligning technology initiatives with business goals, ensuring resources are allocated to projects that offer the greatest strategic value and ROI.

How Does EA Support the Reduction of Legacy System Maintenance Costs?

EA helps reduce legacy system maintenance costs by identifying outdated systems, guiding modernization efforts, and supporting migration to more cost-effective, efficient technologies.

Does EA Help in Managing Cloud Migration Costs?

Yes, EA plays a crucial role in managing cloud migration costs by providing a structured approach to assess current systems, plan migrations, and ensure optimal use of cloud resources, avoiding unnecessary expenses.

What is the Long-Term Financial Benefit of Using EA For IT Cost Reduction?

The long-term financial benefit of using EA for IT cost reduction includes sustained operational efficiency, reduced risk of costly technology misalignment, and ongoing savings from optimized infrastructure and resource utilization.