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Taming the Tech Beast: How Small Businesses and Nonprofits Can Control IT Costs

Writer's picture: Dale TuttleDale Tuttle

As the Artificial Intelligence (AI) boom envelops everyone and everything, it is also contributing to enormous increases in IT costs for small and medium sized businesses (SMBs) and nonprofits.  Let’s see how AI is an important driver escalating IT costs before we look at some practical steps to deal with the problem.

Most SMBs and nonprofits are along for the AI ride. What I mean is most of us will use the AI tools that are provided by vendors rather than develop our own AI-infused tools. While some small businesses and nonprofits may elect to install an AI model and then develop their own AI solutions around that model, or develop their own AI-Chatbots using a Gen AI development framework, the vast majority of us use the packaged Gen AI tools developed for mass consumption (such as CoPilot, ChatGPT, Gemini, Claude, etc.) for additional cost. This doesn’t include all the other tools that are being enhanced by AI.  Pretty much every one of your existing vendors is pushing AI enhancements to their core products. Even laptops are now coming out with AI enhancements.  All this means extra costs for software subscriptions and now hardware (e.g. laptops). Let’s dig into this.

For businesses using Microsoft 365 Business Standard ($12.50 per user per month), the allure of AI-powered productivity tools like Copilot might make sense. However, the cost for business users is another $30 per user per month — more than twice the base subscription. On top of these fees, you also have to pay for an annual subscription, which is an extra $360 per user upfront for the year

Now let’s look at the proliferation of AI across your business applications. Assume you are an existing Salesforce customer and you are interested in their AI enhancements.  Salesforce Einstein starts at $50 per user per month and goes up from there. Salesforce is of course not alone; this trend of expensive AI add-ons is prevalent across the tech industry, making it increasingly difficult for small businesses and nonprofits to manage their IT budgets effectively. The complexity of AI pricing models and feature overlap with other AI tools (like Copilot) creates an additional challenge as your IT leadership has to make decisions on what to purchase.

What Now?

The current tech environment is undeniably confusing, complex, and expensive. With IT costs soaring, often doubling in a short period, it's crucial to find effective cost management strategies across your tech landscape. Let's delve into some practical solutions.


  1. Don’t Ignore AI


●      Implement an AI policy for your staff and then form a working group to figure out how best to use it. You can quickly create a pretty good policy in a few minutes by asking a Gen AI tool to help you write one. The working group can then guide how you use Gen AI in your business.

●      Instead of your business information being used on free versions of tools like ChatGPT, provide key staff with Gen AI tools so you benefit from the enhanced security and privacy paid business subscriptions offer.  It will be pricey, but it’s better to provide some capability rather than none at all. You will also get corporate experience using Gen AI and be able to figure out where it helps your business the most. Remember that if you don’t provide AI to your staff at work, they will use it anyway.


  1. Regularly Review and Analyze Your IT Environment


●      Even small firms experience IT sprawl.  Regularly conduct software audits and identify everything used in your organization. Eliminate unused or redundant tools and subscriptions to save on licensing fees.

●      Periodically assess your technology needs and adjust based on your organization's evolving needs.


  1. Outsource Strategically


●      As you grow, consider outsourcing IT tasks to a managed service provider (MSP). This can be more cost-effective than hiring dedicated IT staff. The downside is you must then manage your vendors.


  1. Train Your Staff


●      Empower your staff to resolve common IT issues themselves through basic training. This can reduce reliance on external IT support. In fact, asking your Gen AI tool how to solve common issues is a great way to solve problems yourself and get your staff up to speed with using Gen AI tools.

 

  1. Automate your manual processes


●      This is hard to do for small businesses, mostly because doing things manually is often easier than automating things. Nevertheless, keep this on your radar.  If manual processes like payroll, tracking expenses and other routine tasks start taking up a lot of time, think about quantifying the effort (cost) and determining how best to automate them. Also try to use an existing tool in your inventory to automate things.  Time and time again I see small businesses buy a new tool when an existing tool they already own could do the trick. Stay tuned for more on this.


These recommendations are straightforward but more than ever, a disciplined approach to controlling IT costs is needed to manage the IT cost wave.  The next step is actually finding the best use-cases to get a return on all that extra spending.


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