5 tactics to reduce IT costs without hurting innovation

CIOs are in a tough spot. They’re being told to spend less on IT, but at the same time, still expected to drive innovation and keep the business thriving. With the economy on shaky ground and new technologies popping up all the time, it’s getting harder to do both.

But the good news is saving money doesn’t have to mean falling behind. Many CIOs are finding inventive ways to cut costs and still invest in what matters. They’re getting rid of old systems that no longer work, teaming up with CFOs to make better spending decisions, and using AI and automation to get more done with fewer resources. It’s all about working smarter, not just cheaper.

“Reducing IT costs and accelerating innovation are not mutually exclusive,” says Arvind Joshi, COO and CFO for global technology at JPMorganChase. “When done right, cost discipline should enable innovation. We take an approach that blends development, financial management, and operational discipline to extract as much value from our $18 billion technology investment as possible.”

That kind of approach is catching on beyond the big banks. Across industries, CIOs are realizing they can stretch their tech budgets without sacrificing innovation, as long as they stay strategic.

“As a tech lead managing infrastructure and platform teams, I’ve seen how CIOs can reduce IT costs without stifling innovation,” says Chandrakanth Puligundla, software development engineer and data analyst at Albertsons Companies. “It just takes discipline, strategy, and the right tools.”

To help get the best of both worlds of reducing costs without hurting innovation, here are five smart tactics to help CIOs exceed expectations.

Cut unit costs, free up resources

For Joshi, the key is ensuring all teams follow the same rules to manage costs, and update cloud systems and other tech in order to make them more efficient. It also means simplifying how software gets built, and making sure engineers take responsibility for how they spend on cloud tools and services.

“These focus areas provide significant dry powder for investments in innovation, growing infrastructure and engineering demand because of continuous digitization of existing and new revenue streams,” he says.

And instead of just trying to cut total costs, focus on getting more value out of each unit so the business can do more without unnecessary additional spend.

“Absolute technology costs will continue to grow with organic business volume growth, new products, features, and platforms as revenue streams become more digitized, hence measuring absolute cost reduction is less relevant,” Joshi adds. “Instead, it’s more important to hold the organization accountable for reducing unit costs for compute, storage, and other technology products. This is a better measure of efficiency and cost reduction.”

Michael Corrigan, CIO at World Insurance Associates, is on the same page. He advocates implementing financial management for IT to keep costs in check by regularly adjusting resources and making smarter spending choices.

“By making IT costs visible per project, teams are encouraged to innovate efficiently and stay within budget constraints,” he says.

Strategically automate with AI

Lucas Tanner, CFO at Carta Healthcare, says CIOs should focus their automation strategies on complex, high-volume tasks where AI can make the biggest impact.

“Our automation of data abstraction from clinical records illustrates a key principle: AI should not merely automate but elevate human effort,” he says. “Internally, AI copilots are deployed across engineering, revenue ops, and go-to-market teams to accelerate output without adding headcount. By measuring AI’s impact through KPIs, CIOs can confidently redirect human capital toward innovation, while proving ROI on AI spend.”

While Tanner emphasizes the power of AI to augment large-scale business processes, Tristan Shortland, CTO at Infinity Group, highlights similar benefits in everyday IT operations.

“By finding areas of repetitive, manual labor within your IT operations and streamlining them with automation, you can reclaim time, drive accuracy, and move from reactive to proactive IT,” he says. “This not only makes your IT more cost-efficient, but frees up staff to focus on innovation, upskilling, and strategic work that will drive business growth.”

Shortland adds that AI can make automation even more powerful by handling a variety of tasks, such as answering questions or completing IT jobs. This helps to further cut costs and lets teams spend more time on more important work.

“The cost savings from efficiency gains can then be reinvested into innovation initiatives, creating a virtuous cycle of efficiency and progress,” he adds.

Bill Hineline, field CTO at software developer Chronosphere, agrees that the cycle of innovation only accelerates when AI is applied to the right kinds of work.

“Automate what’s known, repeatable, and boring so teams can spend their energy on innovation,” he says. “One of the most effective AI applications I’ve seen is using LLMs to automate test script and test data creation. These are tedious, time-consuming tasks perfectly suited for AI. And as a bonus, they directly speed up delivery cycles.”

Collaborate with finance

Cutting IT costs the right way means teaming up with finance from the start. When CIOs and CFOs work closely together, it’s easier to ensure technology investments support the bigger picture. At JPMorganChase, that kind of partnership is built into how the teams operate.

“It’s beneficial that our organization is set up for CIOs and CFOs to operate as co-strategists, jointly developing and owning an organization’s technology roadmap from end to end including technical, commercial, and security outcomes,” says Joshi. “Successful IT-finance collaboration starts with shared language and goals, translating tech metrics into tangible business results.”

That kind of alignment doesn’t just happen at big banks. It’s a smart move for organizations of all sizes.

When CIOs and CFOs collaborate early and often, it helps streamline everything from budgeting, to vendor negotiations, to risk management, says Kimberly DeCarrera, fractional general counsel and fractional CFO at Springboard Legal.

“We can prepare budgets together that achieve goals,” she says. “Also, in many cases, the CFO can be the bad cop in the negotiations, letting the CIO preserve relationships with the new or existing vendor. Working together provides trust and transparency to build better outcomes for the organization.”

The CFO also plays a key role in managing risk, DeCarrera adds. Whether it’s handling insurance or preventing fraud, the CFO aligns with the CIO to help keep the company safe.

“Things like deciding on levels and cost of insurance, the processes and solutions implemented for cybersecurity, and employee training all will involve both the CIO and CFO,” she says.

Clean up and simplify systems and data

One of the biggest opportunities to cut costs and boost performance is cleaning up outdated systems, unused applications, and unnecessary data.

“Migrate legacy systems to cost-efficient cloud services and virtualized platforms, thereby reducing maintenance expenses while gaining access to modern capabilities,” World Insurance’s Corrigan says. “This frees budget that can be reinvested in using cloud analytics or AI services.”

Additionally, he says CIOs need to audit software and tools to remove duplicate or underutilized applications.

“Standardizing on fewer platforms lowers licensing and support costs without impacting functionality, as teams consolidate on common innovative tools,” he adds.

That same idea — getting more out of fewer, smarter tools — is helping a lot of CIOs uncover value they didn’t know they had.

“Smart tactics start with rationalizing tool sprawl,” says Albertsons’ Puligundla. “We often find teams using three or four different platforms that do nearly the same thing. Consolidating these into fewer, more strategic tools reduces licensing costs and simplifies workflows, freeing up time and budget.”

But cleaning up old systems is only part of the equation. Data needs the same attention.

“One of the most effective tactics is addressing data debt, the habit of storing and processing all enterprise data as if it’s equally valuable,” says Rich Prillinger, senior director of platform engineering at tech firm Mezmo.

By profiling data across systems and understanding what’s actually used, CIOs can make smarter decisions about what belongs in costly tools, what can be archived, and what’s simply redundant. “This significantly reduces costs while preserving the capacity for innovation and speed where it matters most,” he says.

Get smarter about vendors and contracts

When money’s tight, managing vendors wisely can lead to big savings and free up budget that can be used to fund innovation. That means knowing exactly what you’re paying for, pushing for better deals, and avoiding waste tied to unused licenses or redundant contracts.

Rebecca Wettemann, CEO of tech analyst firm Valoir, says CIOs can save significantly by tightening their approaches to procurement.

“Work with procurement and finance to understand exactly what’s being spent,” she says. “This is particularly important in environments where departments or teams may be empowered to make some cloud technology investments themselves. That means there may be multiple contracts for similar technologies or even with the same vendor, which are opportunities for consolidation and better volume-based negotiation.”

CIOs should also buy for current needs, not volume discounts, and that undeployed licenses are just like burning money “Even a discount for licenses you’re not using is still a net negative,” says Wettemann, adding that CIOs should demand value-based pricing from vendors. “Look to vendors that are willing to share telemetry and other data that shows you usage and impact, and those that have an ongoing optimization practice driven by real data, not just quarterly business review lip service,” she says.

Re-evaluating every license maintenance contract is also critical for saving money to invest in more strategic initiatives.

“Paying license maintenance when you don’t need it is an expensive habit that needs to be broken,” Wettemann adds. “Look to third-party support vendors to cut your ongoing application and database support costs while maintaining application security and performance, often at higher levels than vendor-provided maintenance.”

Nic Adams, CEO at security startup 0rcus, puts it more bluntly.

“CIOs must approach vendors as adversaries: threaten alternative providers, demand quantified concession points, and refuse standard terms,” he says. “Legacy support contracts for end-of-life platforms still bill annually. Scrub every contract, cancel anything unsupported, and reallocate that capital to new initiatives.”