The Myth of Information Technology as a Cost Center


Do you or your business's decision makers view your IT system expenditures as a bottomless pit tied directly to the bottom line?  When the budget's tight, is IT one of the first to the chopping block?  Are your users frequently ailing from sluggish PCs or inefficient workflows?

IT is commonly thought of as a "cost center," or in the words of Investopedia: "a department… that does not directly add to profit, but which still costs …money to operate."  For many, spending money on IT is about as fun as paying for taxes, insurance, and copier paper.

It's easy to lose sight of the need for an up-to-date IT system if its effect on the organization's success can't be easily seen or measured.  Additionally, the benefits of adding another "feature" or "layer" to the current IT system, even if aligned with your organization's goals, can be difficult to foresee and therefore cost-justify.   Furthermore, it can be easy to brush user complaints about IT system inefficiency under the rug because of the upfront costs of alleviating such issues.  However, I would pose these three questions as food for thought:
  1.  Before we had our [      ] system, were our employees more or less productive?
  2.  How much time are our employees spending on IT-related issues per week, rather than focusing on growing the business?
  3.  Is our current system preventing us from expanding our business volume?

Take document sharing as an example.  File servers (or other file sharing platforms) are fairly commonplace in business environments today.  If you have such a system, what was your workflow like before you implemented it?  Have you been able to conduct business more efficiently, and have you been able to expand business volume as a result?

Perhaps the system was great at first, but the system's age, combined with increasing business demands, have led to workflow inefficiencies and your employees are now spending a portion of their day resolving IT-related issues.  Consider this example:  Your business compensates an employee $20/hour, but this person spends 1 hour per week on IT-related problems rather than on normal business tasks.  This could be costing your business over $1,000 per year in lost productivity from just a single employee.  If you are putting off upgrading your system, there's a high probability that many more than just one user is dealing with IT problems on a frequent basis.  Not only is your organization foregoing employee productivity, but it's also foregoing the business volume that these employees could be drumming up.  What are the real costs of putting off your business's IT infrastructure upgrade for another year?

Lastly, every business has dreams on how it can better serve its current customers while attracting new patrons.  Perhaps you've heard of new IT-enabled features that are adding value for other organizations in your industry.  Are budget conversations preventing your business from competing in a comparable fashion and enjoying similar added value?  Could you gain an edge by leveraging IT in ways that your competitors are not (yet)?

I hope this post has prompted some thought about whether or not your organization views its IT system as a cost center, and whether this view is real or perceived.  We'll be proactively advising our customers if we think their systems could use an upgrade.  However, give us a call any time if you'd like us to perform a review of your systems or talk future strategy!

written by: Jake Molko - 8/20/2013