The Hidden Costs of IT Solutions
Pay Attention to the Forest as well as the Trees
It goes without saying that the initial costs of any IT Solution are wrapped up in hardware and software. These cost components are easily identified and capitalized over a period of time, but what about the cost to keep the system “up and running”. According to Gartner, these costs make up about 66% of the IT budget, yet these expenses are often overlooked. The ongoing maintenance efforts involve; operating system upgrades and patches, hardware upgrades and/or refreshes, software upgrades and patches, etc. These never-ending costs involve money and time, as well as technical expertise.
Every Cloud has a Silver Lining
Many of these added expenses can be mitigated by going to a hosted or cloud solution, where the software provider is responsible for these functions and costs. This transfers your ‘Cap Ex’ into ‘Op Ex’, and is more predictive and consistent in terms of budgeting expenses. Additionally, you do not have to invest in the resources and technical knowledge to perform the on-going maintenance and upgrade tasks in house. One other benefit is that you’re not unraveling years of investments in technologies that are no longer up to date, a risk that is greatly amplified when incorporating in-house IT solutions. In addition to gained efficiency in the business, companies adopting cloud solutions were outpacing their competitors in differentiating to customers. According to a survey conducted last year by IBM, those companies outpaced their competitors Compounded Annual Growth Rates (CAGR) in both revenues and profits. Read IBM’s survey here.
Getting the Bang for the Buck
Now that you have this solution in place, whether it is in-house or hosted, you have to ensure you are making full use of the solution and getting the business benefits promised. This involves the initial training, documentation and SOPs, as well as the on-going efforts to keep these up to date. Software and hardware solutions typically come with ‘generic’ documentation and processes, but these rarely cover the operational scenarios that you may encounter in implementing the solution. Operational knowledge and experience is the key to avoiding additional cost exposure in this area.
Lost in Translation
Turnover is inevitable in every company, and passing on the solution knowledge is usually ‘mouth to mouth’. However, this lends itself to ‘usage degradation’, as much is lost in translation and no one remembers everything. So having your training, documentation and SOP resources in place to keep the information up to date as the solution evolves is critical to ensuring the business benefits. This process can be costly but with the right guidance the solutions remain viable and relevant to the organization.
The Sum of the Parts may be Greater than the Whole
Then there are the hard costs often overlooked as the solution evolves. This is especially important when mobile technology is involved. Whether it’s asset tracking, communication cost optimization, repairs and maintenance or training, this is an on-going effort that often degrades over time. Re-visiting these items on an annual basis (minimally) is required as your business changes, the technology changes and your opportunity for savings optimization increases. You know more about your needs and have more leverage in dealing with your vendors on pricing. Many companies never take the time (or have the time) to do this.
The same principals also apply to other areas of technology spend – your ability to leverage your knowledge of your ‘actual’ usage gives you greater flexibility in negotiating with your vendors. This could apply to your communication circuits, phone systems, printing and copying costs, wireless costs, disaster recovery and business continuity plans, and hardware purchases, just to name a few.
Taking the time and effort to re-optimize these components involves knowledge and experience in dealing with vendor negotiations. This is where outside expertise and an objective point of view can come in handy. One guideline to consider; companies who do their “homework” before negotiating will typically obtain pricing that is 15 percent to 25 percent better than those that do not. Investments in resources to assist in the evaluation in these areas and mapping of the solutions will more than pay for themselves.