We’re strange creatures, aren’t we?
However rational we try to be, we make all sorts of illogical financial decisions.
And while you might be nodding your head, thinking of the ‘mental accounting’ you do on a night out, it’s worth pointing that we’re not much better in business mode.
Sure, we have stricter financial rules when we’re running a business, and of course we make more ‘rational’ decisions.
But the very way most businesses conceptualise their finances is often misjudged.
Obsessed with efficiency, keeping costs low and ensuring that every spending decision has a strong, defendable rationale attached to it, we see things in extraordinarily limited terms.
For example, we rarely think about opportunity costs – what making one decision prohibits us from doing.
Equally, we don’t consider the cost of not doing things, partly because we can’t foresee how it will impact the business clearly.
It’s difficult to conceptualise our business spending over long periods because so many hidden variables will come into play.
What we at Elite are sure of, however, is that there are all sorts of hidden costs to cutting corners and maximising ‘ efficiency’ when it comes to your IT spend.
So why do people do it?
The simplest explanation is that businesses don’t see the cost.
But beyond that, it can be hard to justify higher spending to higher-ups.
And the people making these decisions are rarely IT experts, and rarely even have direct access to an expert opinion.
But what are the costs?
The most obvious cost of cutting IT costs is missing out on potential competitive advantages.
And this often means allowing you competitors take that advantage!
This kind of cost-cutting can be all the more deeply entrenched when you realise that advantages can come from both software and hardware.
For example, new software may be released which could supercharge your business’s performance, but running it on your ‘efficiently costed’ hardware, it may not be able to run properly.
On top of this, there is the potential for systems failures to totally derail whole days of work.
And this isn’t just an economic cost – it also strikes a blow to employee confidence and morale, not to mention disgruntled customers and appearing to the public unprofessional.
Even if you don’t have a full-on systems failure, the costs of maintaining weak, cheap technology will very quickly mount.
Not to mention the fact that technology tends to leave its predecessors behind, so the most rigorous updates and securest systems will simply be unavailable for older, less robust technology soon enough.