Reducing the Impact of Rising IT Labor Costs

September 27, 2024

Is your company’s IT department feeling the squeeze of rising labor costs, while finding it increasingly difficult to secure top talent?

With global demand for IT engineers continuing to grow, labor costs have been soaring. This is particularly true in the most digitally advanced markets such as ^[GC1] the United States and Europe, and Asian nations like Singapore and Japan. In these areas, where demand outstrips supply, salary competition between companies has intensified, which inevitably hits a business’ bottom line.

Mitigating these rising costs is a priority for many businesses. Unfortunately, there is no silver bullet, no single action that will address this problem, rather businesses should take a multifaceted approach, and come at the issues from different directions.

1-1. Cutting Overtime

Different countries and cultures have different attitudes towards overtime. Some countries, particularly in Europe have implemented strict labor laws that limit excessive work hours. In other areas such as the US and Japan, there are either no nationwide restrictions or laws are flexible enough to allow significantly more work hours than in other countries.

When it comes to IT, many engineers are pushing at the limits of the hours permitted by the law. The IT department is the backbone of an organization running systems 24/7 and the driving force behind business development and innovation. As such team members are often needed to put in extra time to meet project deadlines or to troubleshoot problems that could disrupt business. However, since overtime work inevitably costs more that work completed in regular work hours, it is in the interest of the company to minimize it where possible.

To do this, companies can take measures in a number of areas which will reduce the need for staff to work extra hours. These are focused in two areas: schedule management, and skill and knowledge development.

There are several management tools available to help companies plan, manage and track project progress. In a previous blog post discussing Incident Management Software, a number of these tools were mentioned, such as ServiceOne and Jira. This is because the IMS tools are extremely versatile, after all an incident response is essentially a mini project, and the same principles of planning, management and monitoring can be applied at a more complex level to system renewals, service development and roll outs, and even employee training and skill development. These tools help managers to visualize work progress, track working hours in real-time, and provide schedule management functions.

On the other hand, if you just want to monitor the number of hours employees are clocking up, Time Management tools are also highly effective, offering functions such as real-time monitoring, automated overtime calculation, and notification alerts when set working hours are exceeded.

Another area of approach is introducing alternative work schedules. Adopting flextime, comp time (compensated time off), or compressed work weeks can all directly or indirectly help to reduce overtime and costs. Flextime allows employees to work during their most productive hours and complete tasks more efficiently. Comp time, in contrast, is where employees receive time off instead of payment for working overtime during peak periods. Compressed workweeks, often referred to as four-day working weeks, have been shown to boost motivation and efficiency which can lead to less need for overtime.

Finally, taking a proactive approach to skill and knowledge development can also help to control work hours. Cross-training staff, giving them skills beyond their core work areas, enables workloads to be shared and not concentrated on a small number of people, meaning tasks can be completed more quickly and efficiently.

While these actions have been discussed as a method of reducing overtime and labor costs, they are more generally best practices for improving the overall operational productivity and efficiency of an organization.

1-2. In-house Skills Development

As mentioned at the beginning, there is a lot of competition for skilled IT engineers. Recruiting is difficult and expensive, and salary expectations are soaring, which all contribute to driving up costs. Enhancing in-house training for the engineers who already work for your company to increase their skill levels and knowledge, therefore, makes a lot of sense in the medium to long term. It is often a much more efficient way to get the talent you need and increase department productivity than to hire new engineers. It also avoids pitfalls such as employment mismatches and integration issues that can occur when taking on a new member of staff.

To get the best results from in-house talent development, it is important to have a good understanding of employees’ skills, strengths and interests, and there are a number of tools that companies can use to discover, analyze and leverage these. StrengthsFinder, for instance, can be used to identify an employee’s strengths and aptitudes, suggest development programs and even assign tasks and projects where they will provide the greatest contribution. This can be bolstered with regular meetings to discuss job satisfaction, training progress, and personal goals.

1-3. Introducing Automated Systems to Improve Work Efficiency

Introducing tools to automate processes is another approach to improving IT department work efficiency and reducing costs. Many routine engineer tasks can now be automated and handled by software robots, allowing staff to focus on core tasks such as introducing IT-related improvements and innovation.

One type of tool has already been mentioned. Many Incident Management tools are now integrated with IA functions that can perform many of the tasks previously done by humans such as ticketing, suggesting solutions for users to try, assigning engineers for onsite incident resolution, and incident tracking. Other processes that can be automated include IT asset and lifecycle management, and knowledge management.

1-4. Outsourcing Services and Using Part-Time or Contract Employees

As well as automating routine processes, many non-core tasks can be outsourced to help control costs. Spot projects such as hardware renewal, device kitting, help desk operations, infrastructure management, maintenance and monitoring can all be handled by outside service providers. Furthermore, part-time and contract workers can be used during peak work periods and on short to medium-term projects when it is difficult to justify adding more permanent members to the team. This provides companies with a final approach to controlling costs, letting them quickly secure the people with the skills and resources they need, while keeping fixed costs low.

By using a combination of approaches, companies can control labor costs in the IT department and improve overall efficiency and innovation. Many of the approaches mentioned in this post can be enhanced with support from tools that will automate and streamline processes and improve efficiency. In order to implement them effectively, IT managers need expert knowledge of the tools and options available to them, and understand their companies’ processes and the individuals working in their departments.

If your IT department is feeling the pressure of rising labor costs and you’re looking for tailored solutions to optimize efficiency, we’re here to help. Whether it’s automating processes, developing in-house talent, or outsourcing non-core tasks, our team of experts can assist you in implementing the right strategies for your business.

Contact us today to learn how we can help you reduce costs and improve operational efficiency. Visit our inquiry page to get started!

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