For small business owners, budgeting for IT expenditures often proves to be one of the most frustrating tasks of running the company. You know you have to spend on essential tech that will put you in a position to succeed, but you find that unforeseen costs can mount over time, busting your original budget and leaving you scrambling for cash.
Purchasing and maintaining the right technology is vital to the success of your business, and if you don’t have a handle on how much it is really costing your organization, then the debt can accumulate quickly.
Total Cost of Ownership (TCO): Why technology is more than a one-time purchase
Rather than being content with the initial purchase price, you need to have an understanding of how much your IT infrastructure costs over the lifetime of the assets. This aggregation, known as TCO, can include elements such as initial costs for hardware and software, labor, administration, and downtime. For a standard computer, it is estimated that the initial purchase price of the item actually accounts for less than 20% of its TCO, with the remaining 80% being made up of technical support costs, maintenance, and labor.
With such a large discrepancy, it’s easy to see how this issue can have a huge effect on your bottom line. Unexpected costs are the bane of any business owner, but hidden IT costs can be especially dangerous because the products are expensive and excessive downtime can be catastrophic to the organization.
How can I estimate my total IT spending?
While it’s difficult to arrive at an exact figure for TCO due to the qualitative nature of some of the indirect costs, you can arrive at an estimation that will put you on the right track. The five main categories of costs that need to be tallied are:
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- Hardware and software
- Administration
- Operations
- End-user operations
- Downtime
While certain costs such as hardware and software prices (including updates and repairs), and IT support labor are fairly straightforward, trying to put a figure on the wages of employees who waste time trying to repair IT assets, or calculating lost revenue due to technology downtime is more nebulous. One suggestion is to estimate the total number of hours that are spent by non-IT related employees trying to solve tech issues and multiply by your average wage per hour.
How can I reduce the TCO of my IT infrastructure?
Without fail, one of the surest ways to control and reduce your TCO is to partner with a trustworthy managed services company. Even if you think you can’t afford the cost of the contract, you can save significantly over the long term thanks to preventative maintenance and reduced downtime. It is believed that a $1,000 computer will cost on average $5,000 per year if it is unmanaged. Leaving your maintenance needs in the hands of experts can help you to get more life out of your investments and protect you in the event of an emergency.
Let Great Lakes Computer help you keep your TCO down, and your business running smoothly.
