Most small businesses don’t have the benefit of an experienced and knowledgeable IT adviser to keep an eye on IT expenses like big businesses do. However, as IT plays an increasingly important role in the small business today, IT costs can quickly get out of hand, crippling growth potential, scalability, and financial viability. While you work hard to grow your business, these costs work as a counter-force that add more unneeded friction to the usual challenges of growing a business, often without your awareness.

There are several direct costs stemming from IT that can be closely looked at to figure out where some cost savings can be realized:

Recurring Costs
  1. Internet & Inter-Office Connectivity
  2. Productivity & Collaboration Tools e.g. Business Email, Dropbox, OneDrive, Office 365, Project Management, Point of Sale, and other software subscriptions
  3. Consumables e.g. printer toner and ink, paper
  4. Voice / PBX
Capital Costs
  1. Computers & Servers
  2. General IT Equipment e.g. printers and scanners

Direct costs are very visible but the challenge with them is determining their suitability to your business needs. Do I have the right internet package? Are our collaboration tools empowering or hindering my team? Do I have too many or the right productivity tools? Am I running the right computers and servers? Am I really saving on my phone bill with this new PBX?

Generally, there seems to be a gray area surrounding IT expenditure and many small business owners don’t have the resources to determine, with reasonable accuracy, what the ROI should be on their IT investments. While this type of visibility and foresight requires an understanding of your specific business goals and how IT can help you achieve them, the following scenarios can help you better understand some of the indirect costs that can arise from not investing the right amount and in the right way:

Loss of Productivity

Imagine a company, trying to save a buck by continuing to use old, outdated, and slow (or under-powered consumer-grade) computers. Their staff comes in on a morning, turns on the computers which take an average of 20 minutes to fully boot and login before anyone can begin work. Now extrapolate this across 50 employees. This equates to 1,000 minutes (over 16 hours) of lost productivity just in the first 20 minutes of 1 day. Extrapolate this over a year and it amounts to a staggering 4,332 hours of lost productivity. Not to mention, the company is paying their staff hourly and bleeding significant amounts of money through this single inefficiency.

Loss of Sales

Similarly, the use of inefficient software and inadequate/unreliable hardware can put your business at risk of drawing out the point-of-sale experience for customers or cause extended downtime of your core operations. Inefficient checkouts will slow down your rate of sales, while downtime will halt your revenue generating ability altogether. Is the $300 saved by getting the cheaper computer really worth it now?

Power Consumption
Electricity costs as it pertains to IT are often overlooked by small businesses. However, several factors can significantly affect the amount of energy you consume on a monthly basis. Here are some questions business owners need to ask:
  1. Are computers on a power schedule to turn them off automatically outside of business hours?
  2. Am I converting 220v electricity to 110v and using inefficient and power-hungry transformers when you can be using 220v directly?
  3. Is my network being checked regularly for bitcoin mining bots and other resource intensive malware that drive up CPU usage and increase your overall power consumption without my knowing?
  4. Am I using too many laser printers, powerful computers, or other power hungry devices?
Reputation Cost

The above examples are just a few of many that affect small businesses today. In addition, the unpleasant customer experiences, staff frustration, and high monetary costs of inefficient IT will adversely affect your business’ reputation which can take years to fix, especially in the small Caribbean markets. While applicable to all businesses, this is crucial for those that have a high rate of sales and rely heavily on reputation to generate sales at the right price point e.g. hospitality, food & beverage, distribution, and retail.

If you run a business and are serious about the products and services it offers, and aim to be relevant and viable in the future, IT should not be perceived simply from the perspective of capital cost, but also from what other tangible and intangible benefits can be gained.