IT spend | 22nd Jun 2017

Four big (but hidden) IT cost issues revealed

By HUM

Technology plays a vital role in business these days. It’s changed the way we work and has become a key driver for innovation, efficiency and growth. But while the decision to invest in IT is simple for most small businesses, getting a grip on the cost is not. Many expenses go undetected, which can lead to an underestimation in spend.

So what are the hidden costs, and how best to deal with them? Let’s take a look at the following examples.

1. SOFTWARE AND BUSINESS APPS

It used to be that your workers had to go through certain channels to get their IT sorted. Now all they need is a credit card and a browser, and they can do it themselves, in a flash, online.

This is known as ‘shadow IT’ – and while the user will defend their actions as necessary (“but I need x app to get x task done”), it can result in double ups and disparity, along with some rather hefty bills. At the end of the month, when those expenses roll in, guess who’s paying for all those extra licenses, tools, subscriptions and apps. The business, of course.

If you don’t think this is happening within your organisation, it might pay to do a quick poll. International studies have revealed an appoximate 80/20 rule; that is, 80% of employees admit to using unsanctioned software-as-a-service (SaaS). And the use of unauthorised applications tends to be 15 to 20 times higher than what many managers believe.

2. PEOPLE TIME

Managing the IT environment is tough at the best of times, but it’s particularly hard for small businesses. You often don’t have a full-time, dedicated team to do it, so the responsibility usually falls back on Joan in accounts, or Jack the ops man, the management team, or even general staff (whoever is the most ‘tecchy’) to trouble shoot, problem solve, make decisions and deal with ongoing fixes, updates, installs and admin.

This adds up to A LOT of people hours. It also takes the focus off your core business (so, not the most productive use of time).

Then you start doing the math, and things get really interesting. That’s because it’s not just the labour (hourly rate of whoever’s doing the work) that needs to be considered, but also the ‘burden cost’ - i.e what it costs you to house that person in overheads (usually about 30% on top of their salary). Here’s how that looks: 

Jack in Accounts earns $60 per hour, and spends 5 hours per week on IT-related tasks. Add 30% in burden costs, and you’re looking at a hidden total of $390 per week (or $1,560 per month) that you’re spending on IT. And it’s propbably not just Jack who’s spending that time, there will be others too. Check out our IT cost estimator.

3. DOWNTIME

Technology is great, when it’s doing what it is supposed to. But when glitches, malfunctions, outages and errors happen, the result is downtime, and the implications are huge. Whether it’s a major incident that goes on for days, or a blip that lasts only minutes, downtime is unavoidable, occurs frequently, and costs more than most small businesses think. Check out these figures from one of New Zealands’s leading managed IT service providers, Origin IT:

The average user will experience a minimum of 60-75 minutes of downtime or disruption to IT services per month. For a SME with 15 users that equals a monthly total of 17.5 hours. Translated into dollars (and based on the average NZ employee hourly rate of $30) you’re looking at a dowtime bill - every month - of approximately $2100.00.

And that’s not all. Also according to Origin IT: *The top three tickets at the IT support helpdesk are 1. Line of Business Applications 2. Email access 3. Office applications. These are all business critical functions that, when down, have major ramifications for core operations.

Given that most small businesses don’t have the in-house expertise or resources to deal with these issues, the time it takes to get back up and running (i.e. recovery) can often be long, drawn out and expensive. Which unfortunately makes a bad problem worse.

4. KNOWLEDGE GAP

It’s one thing to invest in the latest IT systems and software, but it’s another thing altogether to make sure that your employees have the skills and knowledge they need to leverage the benefits, and use it to maximum effect.

It’s a question of training, and unfortunately many small businesses don’t have the time, money or capacity to educate their workers properly. A little knowledge is a dangerous thing. It can lead to errors, double ups and lost productivity. And ultimately see your IT investment going to waste.

A SUMMARY (AND A SOLUTION)

The first step to dealing with hidden IT costs is knowing they’re there in the first place (OK tick, got that one covered). Then, once you have factored costs such as people + burden time, downtime, shadow IT and training or knowledge gaps, you’ll have a more realistic picture of what your business spends on IT, and be able to make informed decisions about your options. 

You could for example see how your current IT spend stacks up against a transparent model, such as HUM’s one fixed fee per user per month managed service bundle.

This solution includes 24/7 around the clock IT help and expert advice, troubleshooting and resolution management, server and endpoint monitoring, patching and updates, reporting and reviews, future proofing for your business and more - possibly less than what you’re currently spending, and definitely a lot more bang for your buck than a typical in-house solution.

For a quick calculation on your current monthly spend, click through to this handy HUM estimator now. Just five simple questions and you’re done.

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