How Much is Tech Actually Costing You? Understanding the True Cost of Ownership
Many companies use the latest technology to be as efficient and competitive as possible, but research indicates a good number of them may be wasting money on tech.
One study by Gartner, a global research and advisory firm, found that companies spend $13,000 per employee annually on software as a service (SaaS), but $4,000 is unnecessary due to overlapping solutions.
Ben DeBow (www.bendebow.com), author of End of Abundance in Tech: How IT Leaders Can Find Efficiencies To Drive Business Value, says tech waste is rooted in a lack of attention, awareness, or expertise in identifying inefficiencies within technology platforms and applications.
Business owners and leaders, he says, can avoid these costly problems by doing a detailed analysis before making a big tech purchasing decision. DeBow calls that approach estimating your “total cost of ownership (TCO).”
“You wouldn’t buy a car based on the list price alone,” says DeBow, the founder and CEO of Fortified, a next-generation database consultancy focused on planning and designing data systems for performance and scalability. “You know there are other things that go into that purchase, such as gas, maintenance, depreciation, etc. You would factor all these things in, and more, before deciding which car to purchase because you want to know the total cost of ownership of that car.
“Why aren’t we doing this for technology systems? If we don’t start to adopt this mindset now, the cost of inefficiency and, more importantly, the cost of inefficiencies over time, will become overwhelming. My fear is that if we let things continue as they are, the millions of dollars in unforeseen technology expenses to all businesses trying to compete in today’s 24/7 always-on world will become trillions as companies migrate to the cloud. Aside from the impact on corporate bottom lines, no one wants to see a world in which the costs of technology will outweigh its benefits.”
DeBow offers these key points for business owners/leaders to consider to estimate and optimize the TCO for their technology environment:
● Total cost of ownership. The concept of total cost of ownership used in pricing cars can be applied to software and servers as well. “We need to build these types of tools in the IT industry to truly understand system waste and inefficiencies,” DeBow says.
● Long-range costs. “Understand the costs you’re incurring today,” DeBow says, “but also how these costs will compound over time as your business and data grows.”
● System efficiencies. “These can be identified by rightsizing the capacity of servers to review the efficiency of the applications, code, and data to find areas of optimization,” DeBow says.
● Acceptance criteria. Today, the majority of the applications focus on functionality and not the costs or efficiency to run the code. “The acceptance criteria needs to include cost and efficiency as companies move towards a cloud utility cost model,” DeBow says.
● Proactive cost-cutting. The issue is not one of simply cutting costs, but rather, DeBow says, “proactively taking costs out of your systems in the first place. This means identifying cost takeouts to minimize waste and optimize resource consumption within processes and applications.”
● IT and finance partnership. Gaining financial transparency into technology systems “requires collaboration between IT and finance from the outset of any new project and clear lines of communication thereafter,” DeBow says.
“If you don’t keep your car’s engine tuned, its efficiency will go down and it won’t be there for 10 years down the line,” DeBow says. “If you do, it will need less maintenance and burn less fuel. Technology is similar and could be impacted more as your business, transactions and data continue to grow at higher and higher rates each year.
“There are two paths you can take. The traditional path, and be told these are resources it’s going to take, and you pay for them. Or you can go down the new path that takes a lot fewer resources. The difference between the two paths over time is your savings.”