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In this article, we will discuss a few ways to save money while investing on IT projects with the right plan and decisions.
Business information technology (IT) began with the humble telegraph, at least according to some people. Its invention in the mid-19th century meant something remarkable for business owners and their customers. Gone were the days of messengers on horseback making round trips for weeks, as the telegraph made communications way faster.
Fast forward two centuries: a business that doesn’t employ IT in some capacity won’t survive in this tech-heavy era. The past few decades have played host to significant milestones in business technology, from the rise of the chief information officer (CIO) to blockchain. Everyone’s quick to jump on the bandwagon, especially when new tech rolls out.
However, adopting IT solutions isn’t without risks, primarily the cost. It’s not unusual for many eager entrepreneurs to pursue ambitious IT projects, only to fall prey to things like the sunk cost fallacy, turning projects into money pits. Pursuing such projects doesn’t need to leave a major dent in a business’s finances, though; here are a few ways how.
Know Where To Go
A traveler wouldn’t go to a far-flung place without knowing where they want to go upon getting there. That’s why having a map, whether in print or on a mobile app, is crucial. Similarly, in the business context, a leader and their team wouldn’t embark on a project without a clearly-defined roadmap, also known as a strategic direction.
Most entrepreneurs think that strategic direction is their businesses’ mission-vision statements, but they’re only part of the equation. It also includes information on corporate culture, values, ideals, principles, and—most importantly—strategies for achieving or upholding them. Without a strategic direction, it’s easy to lose sight of what’s crucial.
Having a strategic direction isn’t just some random business tip, either. According to the Quality Management Standards (QMS) enshrined in ISO 9001:2015, it’s a must for:
- Knowing a company or institution’s overall context
- Making sure quality goals are in line with the strategic direction
- Confirming that the quality policies follow the strategic direction
- Ensuring that any reviews are aligned with the strategic direction
Nowhere is the need for one more significant than in planning IT projects. With an abundance of IT solutions in today’s market, business owners should focus more on fulfilling their needs than wants. In doing so, they stand to save money on solutions they might barely use.
One good example of the effects of a lack of strategic direction is cloud overspending. Despite the cloud’s promise of reducing overheads in the long run, many entrepreneurs find themselves overestimating their cloud needs. One study in 2018 found that companies have spent on average 42% more than usual for cloud services.
Decide Between In-House And Outsourcing
Once the project plan is ready, the next step is deciding between forming an internal IT team and leaving it to managed service providers (MSPs). You’ll be surprised at how considerable the cost difference between these two options is.
A comparative study in 2017 ran the numbers for a typical restaurant with an overall capacity of 50 units. Over three years, the in-house option would’ve spent over USD$500,000, with the cost going down by 33% between the first and second year. Meanwhile, the MSP option’s spending was consistent, but the three-year total was only 24% of its counterpart.
The reason for this lies in salary expenditures. Forming an internal IT team involves hiring the right people and paying them; in this case, salaries accounted for 58% of the overall expenses. However, businesses don’t have to pay MSP technical teams as they’re already on the MSP’s payroll—only the professional and service fees.
As with other MSPs, Buchanan Technologies offers managed IT services in Toronto and other areas for more economical costs due to this setup. On top of that, they:
- Allow the business to devote much of its time and resources to its core functions
- Provide solutions that are ready for use as soon as they finish installing them
- Guarantee 24/7/365 support, which can be tricky in workplaces with high turnover rates
However, business owners shouldn’t be too quick to rule out the in-house option. For example, MSPs cater to multiple clients at once; they won’t always know how a business does its day-to-day activities. On the other hand, an in-house team knows far more because their employer has oriented them in its mission, vision, corporate culture, and more.
If you can’t decide between the two, experts consider going for a combination of the two in the meantime. Hire an MSP to handle IT projects and form a small in-house team to work with the MSP to gain valuable experience.
Cut Expenses Wherever Possible
Given the hefty price tag that comes with IT projects, it’s not surprising that business owners will need every penny they can save to make them happen. Even MSPs themselves realize that they stand to make more money by reducing unnecessary expenses wherever they can.
Cash flow issues don’t only restrict a business’s income; they’re the leading cause of business failures. According to the Bureau of Labor Statistics, of over half of the companies that close after five years, inadequate cash flow accounts for 82% of such closures. By comparison, only 42% of businesses close because the market has little need for their goods or services.
Determining which business expense needs trimming can be difficult. Experts advise conducting a cost-benefit analysis (CBA) before any attempt at expansion. This data-driven method paints a clearer picture of a company’s financial health by highlighting:
- Direct costs like production overheads
- Indirect costs like utility expenses
- Intangible costs like the effect of a business decision
- Opportunity costs like investing in new ventures
- Other costs like environmental impacts and competition
Depending on the outcome of your CBA, you may be inclined to follow some or all these cost-cutting guidelines:
- Outsource office needs to wholesale suppliers
- Put up any unutilized office space for lease
- Seek competitive business insurance rates
- Utilize social media for marketing
- Dismiss grossly underperforming employees
- Delegate some functions to subcontractors
- Take advantage of bulk discounts by coordinating with other businesses
- Use less paper and more electronic mediums
- Pay credit card dues on time to avoid penalties
There’s no telling how much a company can save by following these tips. Nevertheless, every penny not spent on costly and unnecessary expenses is every penny allocatable to funding the next big IT project or two. When those IT projects become fully operational, the savings will increase even more.
Increase Spending Wherever Possible
This tip may seem antithetical to the preceding one (and the entire article), but hear this one out first. While reducing business expenses is imperative in keeping a business afloat, let alone fund IT projects, not all benefit from it. In other words, there are some aspects where an increase in spending will do more good than harm.
One such expense is cybersecurity. Since the start of the COVID pandemic, hackers and other cybercriminals have devised new and more effective ways to steal personal information from businesses and sell them to the highest bidder. While a person’s data may go for only around USD$0.007 (as per a 2013 study), keep in mind hackers steal data by the billions.
The average amount of money lost to cyberattacks annually varies depending on the company size, from USD$24,000 among small businesses (fewer than 50 employees) to USD$504,000 among enterprise-level ones (upwards of 1,000 employees). That much money can buy a top-tier business suite for dozens of office computers and then some.
COVID has forced companies to increase spending on beefing up their cybersecurity systems. One study reported an increase from 10.1% of their respective IT budgets in 2019 to 10.9% in 2020. Ten percent is more or less an ideal budget for investing in the latest cybersecurity suites, regardless of company size.
Stay Involved Every Step Of The Way
There’s no doubt that IT as a whole is complicated, let alone employing IT solutions. As such, it’s not surprising that many business owners are reluctant to take a more active role in turning IT projects into realities. However, experts say not staying involved every step of the way is a costly mistake.
Such reluctance, experts also state, most likely stems from an innate fear of technology. But it’s not so much the fear of breaking expensive equipment as the fear of realizing that the investment in said equipment isn’t worth it. As the nature of doing business becomes more digital, the fear of uncertainties in the road ahead becomes more apparent.
However, if history has taught businesses anything, failing to adapt to a changing world is a recipe for failure. Brands that revolutionized the previous generation of inventions (e.g., film cameras, cellphones) won’t be around in the next one because they hesitated to change when market demands told them to.
Any project has its inherent risks and will run into problems along the way—they’re inevitable. Still, taking the plunge at least guarantees some result, unlike not doing anything at all.
Adopting IT solutions can be expensive but not to the point of discouraging companies. Any IT project will be worth the investment with the right plan and decisions. No business wants to be left behind in this tech-heavy day and age.
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