One of Warren Buffet’s most famous quotes is, “Price is what you pay; value is what you get.”
But what does “value” actually mean? For many, price and value are interchangeable. Value does mean the price or cost of something. But it also means usefulness, utility, or importance.
Business leaders, especially CFOs and Controllers, are always concerned with their company’s bottom line. An article from Ernst and Young discussed the changing role of the CFO, saying, “Budgets keep getting cut, yet regulatory challenges continue and the pressure is on once again for finance to continue to improve efficiency and effectiveness.”
Controllers and CFOs aren’t just bean-counters any more. They may live by dollars and cents, but they spend their time creating systems and processes and making them more efficient. They talk in terms of KPIs and other metrics. Their priority is to create a culture where employees are continuously improving business operations.
Your company’s technology investment is one of the ways a CFO can make the biggest impact on efficiency and effectiveness. But it’s a unique situation for each company with varying internal costs, the potential presence of a managed services provider, and more.
Calculating your IT Investment
There are several factors – not just price – that affect the overall value of your investment in technology. Your IT budget will likely include costs for many of the following:
- IT personnel (including the costs of managing that staff)
- Tools used to manage IT
- Telecom services
- Network and security elements
- Server and storage infrastructure (on premise, cloud, or a hybrid)
- Desktop Equipment
- Services included in a monthly contract (i.e. a managed service provider) and ones billed on a per-use basis (i.e. break-fix services, emergency support, projects and upgrades, etc.)
Calculating the Intangible Costs of IT
Those line items may be relatively easy to calculate as long as you have a comprehensive list. What’s hard to calculate are the costs associated with:
- Downtime & lost productivity – Your industry and your type of business can greatly affect the impact downtime will have on your company. If your network goes down for an entire day, or even for just a few hours…how many sales will that cost you? How will that impact your production schedules? Are you in an industry that is especially attentive to time, such as a law firm or CPA firm? If your senior partner can’t work on the weekend, what does that end up costing the company? If none of your employees can do their work for a day, what will that cost your business – and what are the ramifications on your client satisfaction, reputation, etc.? (See why it’s so hard to calculate?)
- Losing your IT guy – If you have a single internal staff person, chances are all the knowledge of your network and infrastructure lies with that individual. He/she may not have it documented, and even if they do it may not makes sense to the next person who looks at it (especially non-technical staff in the company). If that person gets sick, takes a vacation, or leaves the company, what is your contingency plan? Who will provide your IT support until you fill the position? And what if something bad happens during that time? Without current and accurate documentation, your new IT staff will have a steep learning curve and will likely experience many issues out of their control until they get up to speed and build their own systems and documentation (which means perpetuating the same, single-threaded wheel that got you in trouble in the first place).
- A bad hire – What if your new IT staffer doesn’t work out? There are several issues that go with a bad hire. You run the same risks as losing your IT guy, and further extending your gap in adequate IT support. What’s worse, your bad hire could delete or steal files, install viruses, take documentation with them, or otherwise sabotage the company. As the technical person, they literally hold the keys to your business. It’s an incredibly important decision, and can be disastrous when it’s a bad one.
- Data loss or another high-profile security issue – For many companies, data loss or a breach could put them out of business. Data loss carries a lot of costs – the cost of the data itself, costs to recover the data if it’s possible, forensic costs, legal ramifications, loss of reputation, loss of employee productivity while dealing with the data loss, etc. That’s why having a robust DBR policy and business continuity plan is so critical.
- A bad services provider – If your vendor stinks, chances are you’re bleeding money everywhere. They may claim to be a managed services provider, but only include a few services and charge above and beyond for everything else. They may not have the right standards or best practices, letting your network and infrastructure fall apart without you knowing about it. They may address the symptoms rather than the problem, which means IT pain will continue to plague your business and cause long-term issues.
The greatest difference between IT investments lies in the value you receive and the intangible costs, because they seem like “hidden costs”. But in reality, they impact your business operations on multiple fronts and can quickly add up to thousands, tens of thousands, or even hundreds of thousands of dollars.
3 Tips to Get the Most Value Out of Your IT
As a Controller or CFO, the intangible costs are what you want to reduce or eliminate all together. To optimize the value of your IT, here are a few tips:
- Choose an IT services provider – whether you have a small in-house team or not – that is the right fit for your company.
- Your IT solution should focus on preventing problems rather than reacting to them. By maintaining best practices and keeping everything up to speed, you’re less likely to suffer catastrophic issues and costs that add up quickly, such as loss of sales due to downtime and loss of employee productivity.
- Think strategically. And that means the entire management team, not just you as the financial guru. Working with a vendor that provides strategic advisement and IT roadmapping affords the ability to budget months and years in advance. With a roadmap in place, you’ll be able to prepare for new equipment and upgrades.
Apogee IT Services is a managed services provider that prides itself on delivering the highest value for companies looking to make the most out of their IT investment. To learn more, check out our services on our website, how we do IT, or contact us and let us know what you’re looking for.