23 Sep 2011

Planning your IT spend

When it comes to IT spending, SMEs have simple needs. First, they want IT systems that work. Second, they want value for money on the dollars they invest. I’d imagine there are few businesses however, who can claim to have consistently achieved these goals.

From big investments that don’t pay off, to systems that deliver but at too high a cost, managing IT dollars can be a fraught exercise – especially when budgets are limited and mistakes are anything but affordable.

The good news is that technological developments are making the process easier by changing the IT risk equation in favour of SMEs.

Here are a few tips to managing your IT spend:

Spend OpEx, not CapEx
Once upon a time, IT required big up-front investments. With the rise of the cloud, this is no longer the case. Subscription-based services and pay-for-use pricing are now available for everything from software to infrastructure.

Take advantage of this to limit your risks by turning IT into an ongoing operational cost, rather than a dangerously big capital spend.

Decide what you need
Before investigating your IT options, first decide what it is you require. If your business is growing – or if you want it to – you’re going to want something that’s flexible and that can scale, for example. If you want to lower your costs or improve your interaction with customers or suppliers, make sure that’s part of the plan.

Use IT strategically
On the same theme, approach IT as a strategic part of your business. If you can do with IT what your competitors don’t, you’ll have a competitive advantage. Ask yourself what benefits spending on a particular project will bring, and focus your IT dollars on systems that offer your business a competitive edge.

Consider the whole cost
When it comes to IT, support and maintenance costs can meet or even exceed purchase costs. Have the long run in mind when making spending decisions. Products and services that are cheap are often cheap because they don’t offer the support or reliability of higher priced alternatives. Make sure that a dollar saved doesn’t cost many more down the track.

Shift your risks
One of the most valuable aspects of the cloud is that providers are responsible for upgrades and service reliability. Take advantage by offloading as many of the risks around IT and your business onto your provider as you can. With the right agreements and guarantees, you should be able to cap your IT spend.

Work with providers who care
In my experience, SMEs know only too well what it is to work with providers who do not value their custom. As I wrote last week, SMEs benefit by teaming up with providers of similar size. That simple reason is that your custom matters more. Choose your provider carefully by making sure they have the experience and the desire to deliver.

Dave Stevens is MD, Brennan IT

(This blog post was first published on the SmartCompany website on September 22 2011).