Your Strategic Plan is becoming more closely linked with your Technology Plan as the years go by. Technology can often be the strategic plan accelerator if you view it as a strategic asset rather than a cost. Either way, we’re all spending money on computers, software, copiers and telephones, so let’s have a plan to use them wisely, and another plan to purchase them correctly.
Purchasing technology is a balancing act between speed, stability, and cost. If you give me two of these variables, I can give you the third. The relationship really is that direct.
I know it’s obvious, but fast computers that don’t break down, cost more (cash) than slow unreliable ones. Notice the parenthetical “cash” because after a year or so, the slow unreliable computers will actually cost more in support, downtime, low employee morale and even turnover.
The first step is to admit that you don’t actually have a purchasing plan and then make the decision to create one. The term “purchasing plan” is far superior to the word “budget.” Budgets are subject to revision based on revenue volume, while a plan supports a vision with the idea that without support, the vision will not come to pass. Of course if revenues turn down enough, a progressive vision will quickly change to a survival vision and spending will be curtailed in all areas including technology.
Okay, so management is convinced that we need a plan. Now our task is to translate technology dollars into something they can understand. Return on investment is easy to grasp, but there are a lot of ethereal benefits that are difficult to quantify, like employee job satisfaction due to having the best tools available. A more understandable approach is to find what the best organizations in your industry are spending on technology, and plan to spend a little more. Remember if you view technology as a strategic asset rather than a cost, you’ll find a way to create a competitive advantage with it.
The most common benchmark of technology spending is percentage of gross income, which can range anywhere from two percent to ten percent. Be careful to find whether or not your comparison includes copiers, telephones, training and payroll. Some organizations just report hardware and software as technology expenditures. Also note whether fixed assets are accrual or cash basis.
With all this in mind, here is a sample from the service industry:
|Staff & Personnel Expense||20%|
|Fixed Asset Depreciation||30%|
|Software & Software Maintenance||25%|
|Communications & Website||10%|
|End User Training Costs||
|Total of IT spending||100%|
Smaller organizations may have less IT personnel cost, but may not see the hidden cost of IT management performed by a Board member, a volunteer, or a senior person in the organization. Other hidden costs may include downtime, struggle time, and spam-virus- spyware time. There are also categories that span the above group such as security and disaster planning
IT spending policy development is important and can save a lot of annual planning and meeting time. Here are some examples:
- Office software and operating systems – Microsoft
- Switches, routers, computers – Choose one vendor for everything
- Server lifecycles – 4 years
- Desktop, laptop lifecycles – 3 years
- Warranty for life of hardware – 4 hour response for servers.
- Software – (a) Upgrade when available. (b) Upgrade based on features.
Use your purchase plan history to help with current year planning. Link some spreadsheets and cells to show detail and totals of past spending, and be able to quickly see where you have deviated from your plan.
Without a progressive vision, an organization won’t grow. But without a technology purchasing plan, a growing organization won’t prosper.