Does I.T Pay?

Written on the 11 April 2013 by Dennis Littlewood

Does Information Technology Pay?

For any small to medium business (SMB) to survive, wise decisions must be made on where to allocate resources. Any outlay is made with the belief it will improve the bottom line.  Yet, when it comes to Information Technology (IT), little, if any thought is given to the question of return on investment.

Most people equate the term IT with computers.  In reality, IT covers all aspects of computing technology. Networking, hardware, software and communications are all components of IT. Often a computer is purchased simply because it is required to get the job done, without giving thought to the fact  that to be truly useful, computers require infrastructure – cabling, switches, storage systems, etc.  This understanding defines the difference between a computer and IT.

Many SMB’s have approached their IT investment from the perspective of spend and forget.  That is, a computer is purchased, put on a desk and forgotten about until it fails. As with any other business investment, spending on IT should answer two basic questions: What’s it going to cost and what do I get in return?
What’s It Going To Cost?

When examining cost, it is essential to consider operating cost as well as purchase cost.  Let’s use the example of a car.  It is understood that when buying a car it will cost $X.  It is also assumed that over the lifetime of the car there will be costs such as fuel, maintenance, registration, etc.  Applying this to IT expenditure, we need to understand not only what it will cost to acquire the equipment, but what it will cost to maintain it.

It is this cost of IT upkeep that most SMB’s overlook when making a spending decision – careless given that research reveals maintenance accounts for 60% - 80% of total IT expenditure. It is relatively easy to determine purchase cost, but somewhat harder to forecast maintenance costs. There are many issues which need to be considered - backups, disaster recovery, software upgrades, server maintenance, and system monitoring - before a true cost of ownership can be determined.

What Do We Get In Return?

Knowing the total cost of ownership is only half the answer.  IT investment should be able to withstand a cost-benefit analysis as would be applied to any other investment.  Effectively, we need to know how the investment improves the bottom line.  Does it improve efficiency?  Does it reduce turnaround time?  Does it facilitate greater levels of service?  If these questions are not being asked, the result is IT expenditure in place of IT investment.

The Final Word...

IT presents a constantly changing and moving landscape, such that it is impractical for most SMBs to maintain any level of expertise in house.  The commitment in terms of staffing, research, and on-going training is cost prohibitive, with the resulting support being less flexible and adaptive than that required by a progressive IT system. The alternative is to add value to any IT investment, with another wise investment – professional consultancy. Just as servicing a modern motor vehicle is best left to a trusted mechanic, a professional IT service provider can be an invaluable partner in any progressive business.

Copyright Zoom in Business 2013

Author: Dennis Littlewood