Containing IT Costs by Managing Lifecycle
May 8, 2019 - AlasConnect
All companies have to control their costs in order to stay in business and continue to grow. Regardless if you are a running a small or medium business looking to expand or managing a multi-million dollar P&L for an enterprise, being strategic in your technology investments is key to financial performance. Often times, companies can fall into various and all too common traps resulting in waste, inefficiency and overspending.
Key to proper technology planning is understanding both the up front cost of a solution, but also the ongoing maintenance and the eventual disposition of that system. Factoring in yearly maintenance costs and determining when the system will eventually need to be replaced, upgraded or disposed of is commonly called “Managing Lifecyle” and will give you an accurate representation of the Total Cost of Ownership for your technology assets.
Avoid Fragmented Procurement
The old adage goes that “you can’t control what you can’t measure” and technology spending is no exception. If your business is buying technology systems, software, and devices in a fragmented and ad-hoc way it is likely you are spending too much. While it can be empowering to allow the end user to select their own device and simply “buy it” on a corporate credit card or sign up for yet another online subscription service, there are several downsides to this approach:
- Lack of Standardization - Standardization of technology can enable your IT department to operate more efficiently, fix issues faster and as a result lower the impact of technology problems on your bottom line.
- Fairness - Few things can sour an office or business culture like jealousy, let to their own devices individual managers or buyers are unlikely to purchase the same (or even similar) equipment for similarly positioned employees. Make your employees all feel enfranchised in the business by applying consistent technology standards.
- Wasted Inventory - Many businesses have spare or extra devices waiting to be used in the case of a hardware break. Similarly, it is common for a software vendor to sell licensing in bundles or packs. If no one is maintaining an inventory across the organization you could be re-buying hardware or software licenses you already own.
- Necessity - Does it really “move the needle” if you purchase one more online subscription or cloud based service? Will this drive your business forward or be yet another overhead cost adding weight to your expense budget and slowing your business down? Without being able to centrally report on all your technology expenses it becomes difficult to know whether your business is agile and moving forward or slowly bleeding cash from an unseen wound.
Plan and Budget for Equipment Lifecycle
Technology equipment has a life cycle and after a certain period of time will require replacement or upgrade, as it has either become outdated or breaks down. Moreover, as devices age the likelihood of an equipment failure increases. Just as a vehicle may need to be replaced as it racks up more mileage (and repair shop fees), so too do your devices.
Planning for equipment replacement and software obsolescence can be the difference between success, due to a well planned strategic budget, and failure, due to significant unplanned expenses.
To assist with this planning process, here are some common lifecycles for various types of technology equipment:
- Desktop PC’s and Workstations - 3 or 4 years
- Laptops and Mobile Devices - 3 years
- Monitors and Peripheral Devices - 7 years
- Server and Data Storage Equipment - 5 years
- Network Equipment (Routers, Firewalls, Switches, Wireless Access Points) - 7 Years
- VoIP Telephone Equipment - 7 years
Know Your Vendor’s Financial Cycle
Often times your technology vendors have salesmen that have quotas to meet and often times deadlines come at the end of the financial year or a specific quarter. During this time of year, you can often strike a bargain for a hefty discount on a bulk purchase.
If you are not proactively managing your equipment and software lifecycles, you may be unable to capture the benefit of unique timing opportunities with your vendors.
As a word of warning though, don’t overbuy inventory just for the sake of a perceived deal or discount. The most wasteful type of technology investment is one that sits on a shelf, without purposes, and never benefits anyone.
AlasConnect is a Managed IT solution provider operating in Alaska. We help organizations in Alaska and the Pacific Northwest manage the complexities of technology supporting their business. If you have a challenge managing the technology costs behind your operation, please contact us as we can help!