Monday, October 7, 2013

The Self-Service CIO: Value vs Cost

Computers and communications, more commonly referred to Information and Communications Technologies (ICT or lumped as IT) play important roles in small businesses. Most managers don't realize what their roles are until they are gone. Business can come to a halt if the phone stopped working or the computer can't print. Some business can afford to wait for someone to come and fix the problem. For others, this will cost a lot of money.
Yet IT is viewed in some businesses as purely a cost center. Some even view it as a luxury. It is something that the business can live without. Businesses with this view will choose the cheapest option when it comes to acquiring products and services. The idea is simple: something that is just going to cost me, should cost me as little as possible.
The lesson here is that technology is judged by it's value, not purely by it's cost. So how do you begin to value something? You can begin to value something by viewing it as an investment. In fact, anything you buy for the company is an investment. From there the rule is simple: Get back the maximum value for your investment. Now you can look again at cost. Will the cheapest option give me the best value for my investment?
You want something that gives back the maximum value against your investment. However, you are left with the cheapest option because that is all you can afford. If that is your initial conclusion, most likely you are not looking hard enough. Most decisions for  IT solutions fall into either the Build or Buy category. You can buy a complete solution or you can get someone to build it for you from different parts or from scratch. You can expand this further by comparing to how much would it cost to build it yourselves, in whole or parts. Calculate the total cost (including the resources you are spending internally) and the risks before coming to a decision. This way, you are giving the maximum value to your company.

Consider this: the cheap solution, a solution considered purely on cost will keep the company going but will not push it forward. You will survive today but will be vulnerable again tomorrow . A more expensive investment may yield a better value. However, that maximum value must be for today, an actual value now. The value has to be real and not a perceived value. On the flipside, over-spending on something that may provide a return in the future will drain the company before the investment can fully realized.
With information technology, everything is an investment because technology moves very quickly. To any business, the technology is only worth the returns. 

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