I was working on a project that saw me poring through the survey response from a CIO of a regional transportation company. Despite a reduction in his IT budget for 2009, this CIO was optimistic. His rationale was that he will be able to recover at least part of this reduction from renegotiated contracts with vendors.

This is logical, since contractors and vendors will be more likely to offer discounts, or give a better price than to lose a paying customer, especially in a recession.  So what can you do to leverage the downturn to help your own small and medium business? To help you out, I've come out with some suggestions to gain some cost savings for your SMB.

Renegotiate service contracts

Do you outsource part of your operations, or perhaps have an external contractor come in to work on various assorted projects? Depending on the competition and prevailing rates in your area, it might make sense to renegotiate the service contract or hourly rate on a case-by-case basis.

The need for prudence here is obvious, though -- calling in every contractor to demand an across-the-board reduction in rates is a sure recipe for disaster. After all, there is no point in saving a couple of dollars an hour, only to end up with a contractor that is unproven and does a poor job. In areas where there is more competition though, renegotiating service contracts could prove to be an excellent way to improve your bottom-line.

Examine your telecommunications bills

While I had not originally envisioned it as a budget buster, I did earlier this year advocate optimizing your telecommunication bills as a means to eliminate costs relatively easily. This could come from signing up with providers offering more competitive overseas call rates if your SMB makes a large number of overseas calls, or changing to VoIP alternatives such as Skype. In the earlier blog, I also suggested examining your Internet bill to see if a price reduction is possible.

One tip that I did not mention in my earlier blog, though, is replacing physical fax machines with services such as the one offered by http://www.efax.com. Having all incoming faxes automatically converted to PDF and e-mailed to you not only saves on paper and printing costs, but eliminates the need to purchase and maintain your own fax hardware, too.

In summary, optimizing your telecommunications is generally less risky than renegotiating service contracts, since the standards of most telecommunications providers tend to be similar.

Avoid purchasing new hardware

Another way to further reduce your budget for the year would be to avoid purchasing any new hardware, if possible. For example, rather than purchasing a new spam appliance, considering using an online anti-spam filtering service. Also, do you really need to purchase and run your own mail server as opposed to hosting it with a reputable provider?  Will online backup suffice for certain kinds of backup?

What is important is that we take the time to explore innovative yet practical solutions, rather than picking the obvious or first answer that comes to mind. With some diligence, tremendous savings can be gained over time for your SMB.

Do you have any other suggestions to reduce costs in this downturn?  Feel free to comment on them here.