Information Technology is a necessary consideration for businesses in the modern era, but with over 100,000 IT firms in the United States, organizations have many options to choose from. With so many different business types, with different budgets and goals, it’s impossible to lay out any single spending strategy that can work for every company. However, there’s a high-level mentality that can lead you to better IT decisions, no matter what the nature of your business is.
There exists a spectrum, between seeing IT as an investment and seeing it as an expense, and the closer you are to the “investment” end, the better decisions you’re going to make. When you see IT as an expense, you’re going to budget things differently, only paying for things once they become absolutely necessary. There are some advantages to this; for example, you’ll save money, which for early-stage startups is essential for operating lean.
On the other hand, seeing IT as an investment forces you to make decisions that have the highest likelihood of paying off in the long-term, leading to a higher return on investment (ROI) over a period of years.
Why investment is better than expense
Overall, making a decision to invest, rather than merely paying an expense, will pay off in the following ways:
- Shifting from reactive to proactive. When IT is seen as an expense, professionals tend to react to problems as they unfold. They pay as little as possible for their technology and expertise, only escalating costs when a problem already starts to develop. By that point, the problem has already made things more expensive. Investing in better tech and better people means you’ll prevent problems before they occur, which is vital if you want to keep your costs low.
- Improving efficiency. There’s a reason one tablet is $200 and another is $2,000. Devices with more processing power, higher reliability, and better functionality tend to cost more than their inexpensive counterparts. If you see IT as an expense, this leads to sticker shock, but seeing it as an investment helps you realize that better devices lead to higher productivity and morale. According to a UK survey, more than two-thirds of workers felt negatively about their workplace, in part due to outdated technology and practices, with the average worker being frustrated with office tech around three times per day.
- Avoiding excessive frugality. Going too cheap on your IT decisions can lead to disaster. Your technology will fail and your “experts” won’t know what they’re doing. For example, according to IBM VP Fletcher Previn, while Macs cost between $117 and $454 more than their PC counterparts, they end up saving between $273 and $543 in the long term because of their reduced need for maintenance. That “ends up being $57.3 million more expensive per 100,000 Windows machines, or exactly three times the cost.”
- Allowing scale. When you see IT as an investment, you can plan further into the future; 77 percent of businesses rely on technology for growth, according to a Dell survey, so your choice in technology could make or break your plans for expansion. For example, your accounting platform may work just fine for your two-person accounting team, but when you have an entire financial department, will it still be a good fit?
Practical tips
Thinking about IT as an investment is a high-level concept, so what are some practical ways you can incorporate it into your decision making?
- Think in longer timeframes. Don’t just look at the immediate benefits. Look at the benefits as they could unfold today, tomorrow, a year from now, and five years from now.
- Seek value, not price. Rather than scrutinizing the price tag of your decisions, focus on what value you’re getting for each price.
- Experiment. If you aren’t sure how something will perform (whether that’s a firm, a new hire, or a new piece of equipment), consider incorporating it temporarily as an experiment, and eliminate it if it doesn’t pay off.
With these tips, you can start thinking about IT as an investment, rather than an expense, and put your IT budget to better use for the long term.
Larry Alton is an independent business consultant specializing in tech, social media trends, business, and entrepreneurship. Follow him on Twitter and LinkedIn.