IT Budgeting for Small Businesses (Part II)

Click here to read “IT Budgeting for Small Businesses (Part I)”

“Penny-Wise, Pound Foolish” is never the right approach to budgeting. A few phrases we hear in the business world are Return on Investment (ROI) and Total Cost of Ownership (TCO). These phrases should ring true to anyone making a technology decision. This type of analysis should be done for investments in all facets of technology including new technologies, core infrastructure replacement and end user/general maintenance.

It has been my experience that businesses do an excellent job on finding the ROI/TCO for new technologies they will introduce or major server upgrades. However, they often overlook the smaller pieces of technology in their environment. Here are several things that your business may want to consider:

How will my business benefit and what impact will it have on my overall profitability?

The answers may be competitive edge, better sales vision, and efficiency for employees, or simply a reduced risk. Whatever the reasoning, it is always good to assign a number value to the benefits you would experience. This number should include short term and long term gains, as well as possible losses in the event of failure.

What is the cost of the new technology?

In today’s environment there are often two decisions – outsource or build internally? This relates to both new technologies as well as replacement technologies. The cost of implementation, the cost of training, and the cost of yearly support and maintenance over the expected life span should all be considered when evaluating a new technology. Many companies plan and evaluate large capital expenditures quite well, but overlook the cost of general maintenance and support renewals. Lower cost software support renewals upgrades will often save more on your total IT costs.

What will you get if you extend the support agreement on software? Is it worth it?

Generally, software companies are always improving and upgrading the software. This cost includes the ability to call the company that made the product if needed. The good news is the renewal cost is often 1/3 of the full purchase. If you budget for this yearly, you should never need to repurchase the software package again. There is also a good chance there will be an upgrade within 3 years. In fact, software vendors make changes almost yearly to keep up with the fast moving technology landscape. Antivirus, backup software, firewall renewals, peripherals are some common renewals you can expect to see. It may seem as if letting these renewals lapse may save you money very short term, although I think of it as deferred cost.

Keeping up with inexpensive hardware renewals and maintenance could be your savior. Workstation renewals are a common example of where a business can save on support costs and end-user productivity. Older machines have a higher likely hood of a hardware failure. In addition, older machines have a higher likelihood of being under powered for new applications. This means spending a lot of time helping users that experience machine slowness.

Analysis at our business shows support hours per machine on laptops above 3 years in age and workstations above 4 hours of age generally run substantially higher. This is why Thrive often recommends a 3 year rotation for laptops and 4 year rotation for desktops. Other lower cost hardware upgrades often includes firewall (be sure to consider the managed firewall model) and data backup solutions (Managed backup model also exists). Budgeting this as a normal IT cost makes the most sense. Investing wisely will lower risk, reduce employee’s downtime and save money on actual IT costs. The key to this is IT budget planning (short and long term). Make sure to push your IT group to help with this exercise.

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