Last month we looked at the issues of Reliability and Productivity when considering when to upgrade. This moth we will look at Compatibility, TCO (Total Cost of Ownership) and ROI (Return on Investment).
Compatibility: At some point in time an upgrade is going to be necessary no matter how well you have cared for and nurtured your technology. Or, maybe you decide you want one of those new-fangled phones, printers, laptops, (insert desired technology here). This is where the fun really begins. It turns out that your old software is not compatible with your new laptop and your new phone doesn’t work with your old server and your new server won’t work with your old printer . Let’s peel back some of the layers of this onion.
First of all we need to address the fact that no matter how up to date you are there will be moments when moving to a new technology will come with compatibility issues. This speaks to a different set of circumstances generally related to the EARADs (EARly ADopters – A term I have just coined) of the world. Even among this breed there is often less trouble because the fact is that new tech innovations are born from the most recent previous tech innovations (version 5 begets version 6). No one is working really hard right now to create a product that will enhance the capabilities of Windows 98! With this in mind, you have a better chance of mitigating the compatibility issues if you stay current.
Next up are the upgrades that take place by attrition. You have no choice but to upgrade because there is imminent doom on your horizon. I run into this a lot with server upgrades. A client realizes that the server needs to be replaced as it is the command center of his company and it is at the end of its useful life. If this client has been upgrading the other equipment in his network (desktops, laptops, printers, software) at realistic intervals then much of the server replacement will go smoothly. If, however, there are printers that Guttenberg still holds a patent on and software that was written by programmers that have long ago passed away, there are going to be issues.
TCO and ROI: Let’s wrap up this article by considering one final set of factors. For our purposes we will define Total Cost of Ownership (TCO) as a measurement of the overall investment in a particular technology. This investment includes initial purchase price as well as the staff hours and support costs to maintain the technology through its useful life cycle. We will define Return on Investment (ROI) as essentially the “bang for your buck”. This is a measurement of the value you have received for the investment you have contributed (there are economists and CFOs around the world cringing at my oversimplification right now). To get the most ROI one has to be vigilant with TCO.
Let’s say that you buy a new laptop for your company. We will assume the laptop cost 1,000 dollars and you are going to pay your IT Provider an additional 200 dollars to get it set up just the way you want it. Your initial investment is now $1200. Looking at industry standards, you know that the optimal replacement time frame for this item is around three years. Why is this the case?
In the first three years you are likely to be covered by a warranty on the hardware, thus reducing replacement costs if things go wrong. Also, there are generally less maintenance issues with a relatively “fresh” computer. We all remember how fast out laptops worked when we first got them. Three years later it is sometimes hard to remember why we are still using these machines. This is about the point in time that we tell ourselves that we are saving money by holding on to these machines for a few more years. In fact, when you factor in lost productivity, downtime and increased tech support costs, your TCO begins to rise in the fourth and fifth year even if your machines continue to limp along. Add in the factors mentioned earlier in this article and you will find that your overall TCO increases after a certain point and your ROI decreases.
Of course, there is no magic formula to tell you exactly when to replace your aging infrastructure. However, leveraging industry best practices and keeping an eye on mid to long term indicators allow you some insight into how your decisions affect your bottom line. Take some time to sit down with your IT provider to lay out an annual plan for the ongoing support, maintenance and replacement cycle for your tech infrastructure. This will allow you to budget your IT expenses and minimize downtime to get the highest ROI with the lowest TCO.
I hope you have found this article useful and I welcome any comments. Next month we will dive in a bit deeper into the world of early adopters (EARADS) to explore the other side of this conversation.
Latest posts by Robert Patterson (see all)
- The Good and Bad of Early Tech Adoption - July 11, 2011
- How Old Tech Hurts Your Business (Part 2). Get Rid Of It As Soon As You Can - May 19, 2011
- Two Ways Old Technology Hurts Your Business. Get Rid Of It As Soon As You Can - April 13, 2011