How MSPs and IT leaders can optimize cloud costs amid economic headwinds

Lingering recession concerns and sky-high inflation have created a challenging economic environment. Last year, increased consumer demand coupled with supply chain snags gave companies incredibly high pricing power. That appears to be coming to an end, however. As the risk for a coming recession grows, many companies are wrestling with logistical issues fueled by geopolitical tensions, war, and the pandemic.

As businesses navigate increasing economic headwinds, leaders should consider how to optimize IT investments and expenditures to ensure business success during this challenging time.

Preparing During Uncertain Times

Industries and demands are evolving rapidly, so MSPs and IT teams must prepare for change. Without proper preparation, companies risk wasting cloud spending, so now is the time for leaders to rethink their approach to cloud and IT expenditures.

Cloud spending continued to grow during the second quarter of 2022, but analysts don’t anticipate growth to continue. Spending is expected to slow from the mid-20 percent range to the mid-single digits by 2023, according to Wall Street analysts.

Based on the strong quarter, Morgan Stanley analyst Erik Woodring expects 25 percent cloud capex growth in 2022. Nonetheless, he predicts a drop in cloud capex to just 5 percent by 2023.

The economy has decelerated since March, and inflation seems to be at its peak. Markets have shifted more aggressively towards the Federal Reserve's rate path in response to easing pressures. Interest rates were expected to reach near 2 percent by mid-March but have now reached over 3 percent.

These expectations have juiced long-term rates. The economy is further stressed because of steep declines in the stock market, especially within the tech sector. Amid such economic change and uncertainty, now is the time for companies to evaluate their cloud costs and implement a strategic approach that maximizes every dollar in their IT budget.

How MSPs and IT Teams Can Survive Economic Headwinds

Such economic uncertainty breeds many questions. How do we manage cloud costs? Should we invest in new cloud technology? How do we best adopt this technology? For this reason, businesses should consider all cloud options to make sure spending and investments aligns with business goals, strategies, and growth. There are a few things MSPs and IT teams can do to survive economic headwinds:

Monitor industry changes. If you anticipate a downturn in service demand, reevaluate your technology needs. For example, economic changes can have an impact on company revenue and IT budgets. It will take time for inflation to moderate, and it will do so gradually. Even in a recession, upside risk remains. Prices in some markets will remain volatile, allowing opportunities even with a moderated power to pass price increases. Companies will be able to better navigate future recessions if they understand the drivers, their nature and how they impact revenue and budgets.

Review expenditures on cloud services. Companies looking to optimize cloud spending might consider migrating to more affordable solutions. To make disciplined and strategic decisions, leaders must identify which systems to keep and which to consolidate. Companies must also consult the right people when analyzing optimization opportunities. If done correctly, these steps can create substantial value. The cost of total IT spending can be reduced by 15 percent with a well-planned cloud migration.

Consider investing in new technology now. No matter the industry, modern digital technology will continue to drive competitive disruption and growth. So, now may be the time to invest in new technology if your company has the budget and resources to do so. Given inflation, some solutions might be cheaper today than tomorrow.

Leverage solutions to enhance efficiency. If you’re migrating data, it's important to understand your IT systems before merging or implementing new technology. Without proper planning and understanding, projects may result in expensive resource allocations, disjointed IT infrastructure, and long hours devoted to upgrading technologies. In addition, it’s important to have the right solutions and support. Consider leveraging technologies that can automate and streamline the migration process, making it safe, secure, and efficient. As a result, IT teams are free to focus on the challenges that arise during major restructuring.

Think about combining forces. Another option might be to merge your operations with a competitor. Often, this makes sense when the combined performance of the entities will exceed their value as standalone companies. This can consolidate IT expenditures, reducing overall costs.

MSPs and IT teams have numerous options to remain successful amid economic headwinds. Adapting to uncertainty requires companies to regularly revisit their economic outlook, plan for likely scenarios and avoid assuming the worst. The role of technology has never been more critical than it is in today's post-pandemic world.

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Tosin Vaithilingam is a senior solution architect at BitTitan, where he works on the Customer Success Team dedicated to providing customers with essential migration services such as project scoping, planning and proof-of-concept. Tosin works closely with BitTitan’s customers to identify their migration needs, address complexities and develop effective migration plans. His areas of expertise include migrations, solution architecture, mobile device management (MDM), system/server installations and technology sales.