IT spend | 20th Mar 2018

The hidden costs to managing your IT in-house

By HUM

Have you ever booked a flight online and been bewildered by the hidden costs? You choose your ticket price, which seems reasonable at first. Then you’re asked to pay more to take a bag. Another fee is slapped on to select your seat. How about insurance? And taxes? If you want to pay by credit card, you’re charged again. By the time you come to pay, the total looks nothing like the price you started with.

Unfortunately, the same thing can happen with your IT spend. For small businesses in New Zealand, the hidden costs of managing their IT in-house can run into tens of thousands of dollars every year.

You probably think of your IT spend as being a couple of software licences, and maybe the hours of whichever staff member is primarily in charge of IT.

But our data shows that New Zealand small businesses looking after their own IT spend an average of $1,654 per month on ‘hidden’ costs, such as storage, backup, security, training, extra software licenses, servers and hardware.*

If you factor in salary costs for staff - whether that's a dedicated IT person or Jane in accounts - that total creeps up to an average of $2,279 (or $225 per user, per month for the average small business).

It’s important to tally up these costs to get a clear-eyed view of what your total IT outgoings really are (here’s a good place to start). But it’s also crucial to consider that in addition, managing your IT in-house can hit your bottom line in some important, but less obvious ways.

Here are the four biggest, most commonly-overlooked, costs to managing your IT in-house:

1. DOWNTIME

When technology fails, 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 costs more than most small businesses think. Managing IT in-house means that, not only is downtime more frequent, but when it does occur, your staff have to down tools for longer periods of time.

Check out these figures from HUM’s parent company, Origin - one of New Zealand’s leading managed IT service providers:

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.

2. 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 effectively.

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.

3. SHADOW IT

Staff have much easier access to new software and mobile apps than ever before. Previously, they would have to go through official channels to get their IT sorted. Now all they need is a company credit card.

Known as ‘shadow IT’, the unapproved purchase of software, apps, licenses, and subscriptions can quickly add up. A big shadow IT bill tends to occur when staff feel that their IT isn’t serving them well, or when IT strategy and management is lacking.

4. PEOPLE TIME

Small businesses often don’t have a full-time, dedicated IT team, so responsibilities fall on the most “techy” staff, whether that’s Jane from accounts, Jack the ops man, or the management team. This can add up to a lot of people hours. It also takes the focus off your core business (so, not the most productive use of time).

And it’s not just the labour (hourly rate) 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).

A SUMMARY (AND A SOLUTION)

Like booking a flight online, you can see how hidden IT costs can quickly add up to a total price you weren’t prepared for. But it doesn’t have to be that way. 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’ve factored in all of your outgoings (such as software licences, hardware and storage), plus the big costs such as labour and burden time, downtime, and training or knowledge gaps, you’ll have a much more realistic picture of what IT is costing your business, 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 $150 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, training, future proofing for your business and more - probably for less than what you’re currently spending, and definitely delivering 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 IT Cost Estimator now.

*Based on user-submitted entries to HUM's IT Cost Estimator

 

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