Blog / Much More GOOD, FAST, CHEAP: Pick 2 – Pandemic and Poor Economy Put Pressure on IT Spending (Part 3)
In the last two articles, we introduced the topic of Good, Cheap, Fast: Pick Two, a time honoured business guideline describing the tension between quality, price, and delivery. We mentioned that under current pandemic and economic conditions, many managers are feeling the pressure to reduce IT expenses. We explored the idea of what makes for Good IT, and what makes for Fast IT. We learned they both impact overall productivity, as well as the long-term future of many organizations. This week, we’ll explore the last idea of the three, Cheap.
Many IT industry websites and social media channels are filled with articles describing or predicting a dramatic rise in IT spending for 2021. Here are a couple, if you are interested:
Worldwide IT Spending to Surge…
2021 Cyber Security Trend: Bigger Budgets…
The reason stems from a dramatic shift to digital workspaces and virtual gatherings for work and relaxation. The majority of these shifts have been accelerated by the pandemic; we just can’t do in-person any more, and perhaps not until well into 2022.
By way of full disclosure, no one loves a bargain more than me. I regularly shop at online discounter websites, hunting for the best price on a wide variety of products. But I do have a few self-respecting rules; I must know the brand name—and model number—before clicking the Buy Now button. My other rule is I don’t bargain-hunt for services, and the reason is simple; I don’t trust businesses who offer discount services, as the work is often shoddy, incomplete, and not backed-up by any after-sale support when something goes wrong. And usually something does go wrong with bargain services.
Hidden in my rules are two very important concepts: VALUE and TRUST.
- If I know exactly what product I want to buy, then I already know its VALUE to me, and the lowest price wins.
- By my past experience, services require me to trust the provider, and so TRUST trumps price.
My simple rules get more complicated when I don’t know the product and the choices confuse me due to my lack of experience or knowledge. My solution is to get some trusted advice. Sometimes, that drives the price up, but it results in more value to me.
There’s more to value in IT expenditures than meets the eye. We’ve already explored the difference between Consumer-grade and Business-class IT equipment in the first two articles, and both can affect productivity and user satisfaction to the point where it negatively impacts your business operations. Let’s revisit the comparison from a productivity-cost perspective, using our simple desktop computer as an example:
Equipment Cost:
Business-class Desktop Computer: $1,200
Consumer-grade Desktop Computer: $800
Difference: $400
. . . and over five years: $80/year savings
Reduced Efficiency:
Lost Productivity: 5 minutes/day (considered a minimum average)
Average workdays/year: 252
Total lost Productivity: 1260 minutes (21 hours)
Average employee cost: $25/hour
Total Lost Productivity Cost: $525/year
Net COST/year: $445
So, at only five minutes/day in Lost Productivity, it COSTS the employer just under $450/year to buy the consumer-grade computer—or about $2225 over the 5-year life-span of the computer. And when was the last time you heard an employee complain about a slow or erratic computer? Maybe today, but almost certainly this week. Multiply this by the number of computers in your organization, then add the servers and related network equipment that is not performing at peak efficiency, and we are talking serious money. The same formula holds true when you try to extend the lifetime of equipment past the industry-average of five years.
Certainly Cheap IT is not a good long-term solution.
But that’s not helpful if your mandate is to cut budgets and spending. Perhaps there’s another way. Let’s think of it as a problem of affordability, not value. Here is a real-world example where we helped a client with this dilemma (we’ve changed the numbers slightly to help hide the client’s identity):
The client had a stable annual IT budget of $120,000 for about five years. Much of the equipment was reaching end-of-life, so in the late fall of 2020, we recommended a replacement program complete with support and services. The price for all-new equipment and services was within a few dollars of the old budget. However, the client was faced with a last-minute drastic cut to spending, that was driven by a sharp decrease in revenue. The client recognized the value of the proposed upgrades as they knew it would benefit their long-term plans and keep user productivity and satisfaction high. They also had some new services they wanted to add.
- We worked with the client to determine a way to cut the number of active users and supported devices, and allow them the flexibility of changing the number of users monthly to accommodate their part-time and seasonal workers when needed.
- Using our in-depth knowledge of the client’s systems, we carefully extended the life of selected equipment to minimize the effect of lost productivity. We then built a plan to stage their gear upgrades over the first 30 months of the agreement, allowing them to spread equipment purchase (capital) costs over multiple years.
The net impact: The client was able to reduce monthly expenses by just over 25% during slower months, which met their budget targets. Although some equipment will be slightly past the targeted end-of-life, it will be upgraded according to a scheduled plan and have a negligible effect on productivity.
The client worked on the affordability issue without reducing the value, and avoided cheap IT.
So, like Good, and Fast, avoiding Cheap in favour of value IT is about building business stability and growth, and how your IT provider is an essential partner in your business’s success.
Change the formula and maybe you can have all three: Good, Fast and Value.
If you’d like more information about good value IT for your firm, or want to book an appointment to chat about it, please contact me or your TRINUS Account Manager.
Thanks.
Dave White
TRINUS
stress-free IT
dwhite@trinustech.com
