Why saving money on IT can backfire Featured

2:19pm EDT August 1, 2011
Why saving money on IT can backfire

Smart Business spoke with Mike Landman, CEO of Ripple IT about why businesses shouldn’t skimp on their IT investment.

IT is often seen as an expense. It’s treated as an expense on most income statements, and most companies work as hard as possible to minimize it, like any other expense.

Except that IT is not an expense, any more than hammers are an expense for carpenters, or factories are for manufacturers. IT is, for most modern companies, the means of production. The No. 1 tool of the trade for knowledge workers. That makes it an investment.

Ask any craftsman the best ways to screw up a job: Crappy tools. Cheap tools. The wrong tools for the job.

But, all too often, since IT is treated as an expense, rather than as investment, it is skimped on, stretched and ignored. Which is weird because the employee using that tool might make $150,000 in the three years that his or her $1500 computer is usable. A 1 percent investment.

At Ripple, we try to help our clients see the value in keeping IT current, and we give them strategies for doing so in the least painful ways possible. Here are a few things that can help:

1. Create an obsolescence policy. Decide — in advance — how long the useable life of a computer or server should be. Often it’s three years. The day it is purchased, put a sticker on it, mark the retirement date, and track it in a system. A spreadsheet is fine. That way, there are no surprises about when it’s time for a refresh. Each year you will know, long ahead of time, what needs to be replaced and what the upcoming investment will be.

2. Don’t skimp. If you want something to last for 3 years, it can’t be 2-year-old technology when you buy it. We don’t suggest buying the absolute greatest machine in the world for every job, but the difference between a great tool for the job and an inadequate one is measured in hundreds of dollars, not thousands. If a $1,200 computer is the right tool, buying a $900 tool is a difference of $10 a month. A three-year productivity tax on your $50,000-a-year employee to save $10 a month.

3. Find out what the right tool for the job is. The best person to know? Usually the person that will be using the tool. IT certainly has a role, but IT probably had a minimal role in hiring your new $100,000-a-year sales manager — why should they have 100 percent authority in deciding the tools that are best for the role?

No, we don’t think IT spending should be a free-for-all. But it should not get the same treatment as copy paper. For most knowledge workers, technology is the most significant point of leverage in the business. An investment mindset helps get the most leverage possible.

Mike Landman is the founder and CEO of Ripple IT, an IT company that makes IT run smoothly for companies with less than 100 employees.