Businesses are always looking to reduce IT expenditure, but what is the appropriate amount of money to spend on IT?
Not knowing the answer to this question commonly leads to a significant waste of IT investments.
Why? there are a few key reasons.
There are a number of ways that correct management and advisory around IT spending can improve a businesses bottom line. As discussed in recent posts, some of these ways impact performance, sales and efficiency (see. Improving Customer Experience & Engaging Employees).
In this post, we're looking into the impact that a mature IT service partner can have on reducing wasted expenditure in regard to IT.
Think back to the last time you had a notable problem with IT in your business. Perhaps it was slow connectivity, a busted printer, or perhaps even a close call on a cyber attack. What was your reaction? Would you make the same decisions now?
It's human nature to place more value on something in the moment. The price of a new air conditioner may seem absurd until that first 35+ degree day of summer hits. Likewise, it's reacting in the moment that causes businesses to over correct when addressing IT issues.
This leads to over spec'd servers, internet connections, printers, etc. which in and of themselves may seem harmless. The accumulative overspend however quickly adds up, commonly adding 20-30% to overall costs unnecessarily.
Whilst no one is ever going to complain about an internet connection being too fast, it is inherently a waste of money if that connection is not being utilised. Furthermore, the additional IT expenditure generally leads to under investment in other areas.
As the saying goes, a chain is only as strong as it's weakest link. Likewise, technology is only as fast & reliable as it's weakest component.
Supercharging a handful of components rarely out performs a well balanced and maintained environment.
Anchoring is the name given to a common human tendency to rely heavily on an initial piece of information when making subsequent decisions. As an example, someone browsing a range of laptops for $1,800 is likely to consider a $1,300 laptop quite cheap.
Inversely, someone used to purchasing laptops for $900 would see the $1,300 laptop as a premium option.
We become 'anchored' to the initial price point. This anchoring or normalising of pricing left unchecked can create a costly pattern of behaviour.
When a business has previously overcorrected in a particular area, they are likely to overspend again. Because they are 'anchored' to an increased price point, they will have little objection to repeating the purchase. In addition, they may overspend even further, trying to correct an issue that wasn't solved last time either.
Without thorough technology reviews it can be difficult to break the cycle. Technology needs to be regularly reviewed for it's 'fit for purpose'. There also needs to an assessment to make sure that the various parts of your environment are proportionate with each other.
As an example, whilst a set of Pirelli performance tyres at $2,655 each might be amazing, they would provide little benefit to a 2003 Corolla. Likewise, it makes little sense to have a premium gigabit internet connection if your router is only capable of providing 20% of the available bandwidth.
Businesses become caught in a similar cycle of poor purchasing decisions when they are ill informed and haven't challenged pre-held assumptions.
When purchases are made as part of a strategy, outside of immediate need and in alignment with other considerations, ROI is greatly increased. As discussed above, reactive purchases commonly have an immediate & lasting influence on increasing costs.
Inversely, when purchasing decisions are proactive & formed within a greater strategy, expenditure is greatly reduced. Additionally, when purchases are no longer made in a vacuum, the overall performance of the environment in greatly increased.
This combination of reduced IT expenditure coupled with increased speed, reliably and with it, staff performance is what turbo charges businesses with mature IT management & advisory.
Reducing IT expenditure & maximising returns all comes down to effective planning. Having the right advice, backed by a holistic viewpoint & accurate information is what returns results.
Whilst engaging an IT partner with this approach is inherently going to be more costly in the short term, the investment is rapidly overshadowed by the benefits received with more effective management.
Recently we began working with a midsized business where as much as 50% of their ongoing infrastructure costs were unnecessary and providing them no benefit. These costs were a residual of some poor advice, amplified by overcorrections and continued by the normalisation of the spend. This overspend alone was several thousand dollars a month, quickly justifying the decision to make a change.
What normalised costs do you have in your business?
We'd be happy to meet to discuss your business and share our insights on the above topics. There's no pressure to proceed with any changes, we would equally gain value from hearing another perspective and learning about another business and it's challenges.
Simply give us a call or book a time directly here: https://calendly.com/ray-sweeney
