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Working out the true costs of IT to your business

Working out what a company spends on its IT can be a challenge, even for businesses operating from a single site. But if you work for an airline, or an equipment or service provider to the aircraft industry, the chances are high that your company operates from multiple locations, often in different countries and time zones, and in different languages.

 

And if that is the case, it’s likely that many of the firm’s locations may well manage their IT procurement and maintenance requirements either fully or partially independently from the central IT department.

 

Keeping track of how each location manages its IT set up can be difficult to manage, if not downright impossible at times. Even if your business strives to maintain an up-to-date register of assets, it’s just not easy to calculate what’s being spent and when on new IT equipment and software licences, or on staff training.

 

And the further each business unit is geographically from head office, the more likely it will have bought equipment and software or support services which won’t have been accounted for centrally.

 

At least what’s spent on hardware and software is easier to account for. More worryingly, at least as far as the group finance director is concerned, there are other IT costs that may well be missing when it comes to firm-wide budgets.

 

For example, larger businesses normally employ in-house in-house IT experts, each of whom typically earns over GBP£32,000 a year. Whose budget are these costs being met from?

 

Aircraft manufacturers and airlines rely heavily on bespoke IT solutions, which are normally commissioned and supported externally, which means that there is invariably a reliance on external IT consultancy. The average salary for an IT contractor is over £50,000 per annum, and again it difficult to know where these costs are allocated in firms operating in multiple locations.

 

On top, there are some real, but esoteric, costs that should also be budgeted for. First there’s the cost to your business from system downtime. From working in the IT industry for many years, we know that PCs crash for about 35 minutes a month for most businesses.

 

OK, it’s a small amount of lost production for an individual, but you can see how much time is lost when you start to work it out across your staff base. In fact, for an employee earning £35,000 a year, losing nine hours equates to lost production of £163 in wasted wages.

 

It’s not only a waste of wages; you should factor in the lost opportunity to make money out of that dead time. Obviously it’s not easy to put a figure on this lost value, but if your firm lost a key client or sale that resulted from the IT system crash, this could represent a catastrophic loss of value. Think how of many sales would be lost if a giant online retailer lost a major IT hub and couldn’t process payments? According to Infonetics, 51 hours of down time equates to 3.6% of turnover, or £36,000 for every million in sales.

 

As a Cloud computing provider, we know a lot of the benefits of working in the Cloud are often uncosted by our clients. For example, we ask them to consider how much time is taken up in the IT procurement process and what might this cost. Most have never given these a line in their budgets as it simply didn’t cross their minds.

 

Other ‘intangible’ costs, or unbudgeted costs, might include the cost of disposing redundant equipment legally and in line with Waste Electrical and Electronic Equipment Directive. And as systems age, how much time of the in-house IT manager is spent running around making running repairs and temporary fixes? Many of these costs come nowhere within the remit of the bean counters and are invisible on business balance sheets.

 

It’s not only the challenge of accounting for IT costs that has led many companies to adopt Cloud computing solutions. There are many efficiency gains for companies operating across multiple sites. For example, new software releases can be uploaded and rolled out across all sites simultaneously by the Cloud operator. This means your firm will not have different versions of software to keep track of and nor will it have to meet the capital or operating expenditure to have latest versions of software in place as these are costs met by your Cloud provider.

 

Another great benefit is that will be only one IT relationship to manage, and this can be done centrally, rather than on a site-by-site basis. By moving to the Cloud, IT costs can quickly go from being wildly unpredictable to predictable and much easier to manage.

 

At Nasstar we estimate that Cloud computing clients save at least 30% of their IT costs, as a minimum. A lot of these costs are in management time.

 

There are other benefits of Cloud IT solutions. Security, a big issue for all firms, is much better managed centrally. Passwords and permissions can be allocated, logged and regularly changed with a few mouse clicks, and also access to particularly sensitive information easily controlled.

 

Another real benefit of using a UK-based and registered Cloud provider is regulatory compliance. If your provider has ISA 27001 accreditation, you know it conforms to the highest standards in terms of data integrity and its management. It is an important quality mark that tells you the Cloud provider it is regularly monitored and has the systems in place that protect your security and your data integrity.

 

Moreover, think of the productivity gains the ‘always on’ generation produce for the business, able via their phones or blackberries to work extended hours in order to get the job done. And if they are working in the Cloud, the difference between ‘at work’ and outside of it virtually disappears.
Other advantages of the Cloud include 24/7 technical support, and the ability to configure individual desktops in a user’s preferred spoken language, all of which can be run from a single point of contact in the UK.

 

This is why moving to the Cloud makes so much sense, and helps businesses have predictable costs of IT, and of course the peace of mind from 99.99% system uptime.

 

26 June 2012

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