The cost of IT for small business
The cost of IT systems and new technologies impact all business. There’s no distinction between Citi Group or an ecommerce start-up; both need to invest in a reliable IT infrastructure to ensure stability and profitability. As the owner or executive of a small to medium size business (SMB), you won’t have an unlimited budget allocated to investing in new technologies. You are no stranger to working with limited resources that are stretched to capacity to maximise return on investment (ROI).
As a SMB expands and grows, so do its technology requirements. Contrary to popular belief, IT costs don’t need to skyrocket with expansion and growth. SMB managers simply need to be abreast of how money is spent on technology requirements that satisfy day-to-day business operations. Nowadays, nobody can afford downtime, not even Google. A downed network means lost productivity and revenue, not to mention the blow to your brand and company reputation. So this means your business needs the latest technology and unrivalled IT support in place to avoid outage and maintain business continuity.
Given the constraints of the current economy, it’s unlikely that you can justify employing a team of full time IT support engineers. To cut costs many SMBs opt for pay-as-you-go onsite support rather than having dedicated IT staff on the payroll.
Virtualisation technology and cloud computing are commonplace in the business world today. Hardware virtualisation is a trend in IT enterprise that centralises administrative tasks and improves scalability. The cloud computing paradigm means that companies can focus on core business instead of expending valuable resources on IT infrastructure and maintenance. Both systems impact the way SMB executive management allocates technology investment to achieve a lower total cost of ownership (TCO) and maximise ROI.
Technology ROI and TCO
Calculating IT ROI is straightforward. For any specified interval, divide the realised cost reduction and avoidance by the total monetary investment for the same timespan. Note that tech ROI is different from using typical financial metrics where the ROI is calculated as the difference between gains and cost divided by cost.
TCO is usually associated with four factors in the ‘technology for business’ world: downtime, hardware and software, IT operations and administration.
1. Downtime
A wise business person will always has the consequences of potential downtime lurking as a background thought. When clients are unable to access the data they need, business can screech to a halt. Employees become unproductive and annoyed customers look elsewhere for dependable suppliers. Downtime, whether planned or unplanned, contributes significantly to TCO and includes all costs related to server outage. Most downtime costs are hidden and unqualifiable such as the negative reputation acquired by your SMB.
2. Hardware and software
TCO includes expenditure on servers, hardware and software applications necessary to support your IT infrastructure. Added to the bill are contracted IT support such as on-call engineers and all tech maintenance. Unfortunately, it doesn’t end there. The outgoings linked to upgrades, backups and antivirus/malware software are all components of TCO.
3. IT operations
All IT operations depend on a resilient network and storage infrastructure. Moreover, servers need to be effectively configured and deployed, and data centres must be powered and cooled. Again, all direct and indirect system costs that contribute to your TCO.
4. Administration
TCO also encompasses business administration costs such as labour, purchase recommendations and approvals, and contract negotiation. You also need to factor in procurement process tracking into TCO.
Strategize your IT approach
Earlier you reflected on the notion that employing a comprehensive IT support team proves challenging for most SMBs. With daily advances in technology and cybercrime on the increase, your IT infrastructure is vulnerable to network failure, data loss and security threats. Without substantive support for its systems, a SMB is at risk of going out of business when prolonged downtime or serious data compromise happens.
Instinctively, CFOs may consider hiring in-house IT staff to overcome technology challenges. This may be a solution in some circumstances, but it is not without issues of its own. Besides budget constraints, SMBs are faced with the problem of staff retention, especially talented and skilled IT engineers. Such individuals may view a small business as a stepping stone to bigger and brighter future in a large corporation. While doing their job as expected, they will not show particular loyalty or commitment to your SMB in the long run. Your recruitment team may find itself caught up in a cycle of hiring, training and then replacing IT support – a time consuming and expensive treadmill.
Overstretched, tired IT engineers are also prone to human error – yes, even they make mistakes. Badly executed backups or ineffective system monitoring can lead to downtime and all its repercussions. Recent studies confirm that in-house IT staff are responsible for around 40% of IT outages. What’s more is your staff can spend many hours identifying and addressing tech issues.
Many SMBs are unable to move away from the break/fix mentality. In the industry, break/fix means sounding the alarm only when disaster strikes and drawing on the help of an emergency on-call IT technician to fix what is broken. For any SMB, break/fix is an expensive ploy: you’ll be looking at hourly rates of approximately £100, paying travel costs, and have to foot the bill for hardware/soft servicing and replacements. SMBs reliant on these consultants should also anticipate downtime of up to 48 hours; engineers seldom arrive on-site when promised and then will need time to troubleshoot issues.
So how do hiring IT staff or using on-call engineers fit into the picture of effectively managing your IT infrastructure? Short answer: they don’t. Neither approach is likely to decrease TCO and increase ROI.
Cloud pros and cons
Your competitors are no doubt using technology innovations such as virtualisation and cloud computing to effectively save money. Using these technologies means moving the entire contents of servers to a single offsite software bundle or server. So all your applications, critical business data, operating systems and patches are stored and accessed remotely. Fewer physical servers means less space usage, lower hardware capex and reduced energy consumption. The overall effect is that IT management, backup and disaster recovery are simplified and undemanding.
Research conducted by VMWare, a Dell subsidiary providing cloud computing and platform virtualisation software and services, confirms that businesses that utilise virtualisation effectively reduce TCO in IT operations by at least 60%. That’s a more-than-half saving.
Proponents will detail a list of positives as long as your arm, convincing you that these technologies are a fool proof way of managing your IT infrastructure. However, most SMB owners and managers have little knowledge of the risks and incremental costs that these innovations bring along with them.
There is no doubt that cloud computing promotes productivity. It also has the potential to be disruptive when you consider the increasing number of security breaches and data compromise incidents that occur. Also, IT team members, even those with a wealth of experience, will find themselves on a steep learning curve when adapting to the cloud and software applications. Your system administrator will also have their hands full dealing with employees and clients with 24/7 access to your systems. Backups will need to be more frequently scheduled and disaster recovery almost immediate in the event of an unplanned outage.
Reduce TCO using managed services
Greater transparency of the risks of virtualisation and the cloud need to be made apparent to SMB owners and executives. Furthermore, SMBs should be presented with effective solutions and methodologies for IT infrastructure management. All this can be achieved by outsourcing IT needs to a managed service provider (MSP). Your local MSP will have experience, dedicated and qualified IT specialists and access to current technologies. This means the MSP will reduce your IT overheads by automating many of your in-house processes, which are routine and labour intensive.
Partnering with a MSP will mean your days of break/fix are gone. Break/fix is expensive and labour intensive by design. A MSP will mitigate the risk of network failure, downtime and data loss caused by human error. By applying innovative technology tools and solutions to your IT infrastructure, the MSP will enhance productivity and, by extension, profitability in your organisation.
Your local MSP will provide a trustworthy and robust IT foundation for your employees and clients alike. Take a look at some of the services a distinguished MSP will offer:
- remote desktop management and support
- implementing and testing rigorous backup processes
- timely disaster recovery procedures
- updating antivirus/malware software
- managing critical patches and software updates
- performance audits of hardware, software and network
- mobile data management and monitoring
- enforcing network security and BYOD policies
- monitoring network, operating systems and their alerts
Your MSP partner
Some say that MSPs are nothing more than a cost-effective tech solution aimed at displacing your in-house IT engineer or team. Nothing could be further from the truth. The MSP has well-defined processes and tested methodologies that effectively manage your IT infrastructure and proactively identify and eliminate threats before they become overwhelming.
A MSP can take on full responsibility for your IT operations or provide support to your existing IT team; their role will depend on the extent of your need. Always remember, the MSP has expertise, knowledge and understanding of systems, and state-of-the-art tools that sets them apart from any break/fix, quick-fix on-call provider. When you enlist a MSP, you are making a technology investment in proactive risk management.
A further advantage of MSPs is that they provide solutions to meet your specific needs. The MSP will develop an understanding of your business operations, while honing in on your IT infrastructure management. Your MSP partner will conceive and deliver a set of custom services that align technology with your SMB objectives.
ROI up and TCO down
Survival is the name of the game in a competitive, IT-based business world. You need to fully leverage technology innovation to meet the needs of your clients and employees. With this in mind, increasing system reliability and having a flexible business continuity plan in place is vital to maximise team productivity and satisfy your clients.
By partnering with a trusted MSP, you’ll be offered a predictable, fixed-rate contract that has quantifiable economic value. Your SMB will benefit from greater ROI and significantly decreased TCO. In short, the MSP will eliminate unnecessary lost productivity and revenue. You’ll avoid the expensive tariffs tended by break/fix consultants and not lose sleep over concerns of hardware/software repair or replacement costs.
