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Written by Tony Phelps
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Thursday, 17 November 2005 |
Here’s a phrase (and of course yet another 3-letter acronym) much
thrown around in business magazines – Return On Investment. It is
increasingly being applied to IT as well as all the other investments a
business might make, for example a new member of staff, a new
photocopier, or larger office space. ROI simply aims to establish
whether it is worth spending money on something. Are you getting a good
ROI for your IT expenditure?
IT is expensive. IT is also essential to many organisations, businesses
and individuals. As a rule of thumb, you can multiply the purchase cost
of a computer by four to get the total cost of supporting that computer
over its lifetime. Note that a computer lifetime is fairly short –
normally three or four years, after which it is replaced with an
up-to-date model. So this means that each computer you have costs you
about one and a half times the purchase price per year to operate.
Now this applies to businesses which usually have to pay for IT experts
to install, configure and maintain their IT (whether by in-house staff
or external providers). But even home users and those business users
that do everything themselves are spending significant amounts of their
time on non-productive IT work – doing things like installing software,
downloading patches, getting anti-virus and anti-spyware updates,
fixing problems. They could instead be using that time doing more
interesting and/or profitable work.
It is easy to fall into a trap of simply assessing the cost of some
item of IT as just being the cost of getting that item. In reality,
buying it is only the start of the expenses, and the hidden cost of
wasted time is the biggest extra that you may not be counting. Getting
expert IT help is expensive, but you may find that paying for a couple
of hours of assistance from someone who knows what they are doing is
actually cheaper in the long run compared to spending hours of your own
or your staff’s time trying to work things out the hard way.
So, bear in mind that what you see is definitely not what you get in
the world of IT. There is a purchase price and then on top of that
significant extra cost in getting it to work and keeping it that way.
Assess this total cost (yes, another 3-letter acronym – TCO or Total
Cost of Ownership) against the benefits that the IT will bring to you,
and then make a decision on whether it is worth it. It is a difficult
and subjective exercise, but if the ROI is poor or even negative, then
don’t make the investment. You wouldn’t if it were shares in a
business, so apply the same attitude to IT. |
