The Real Costs of IT

When people think of the “cost” of IT they tend to think of how much money they spend on hardware, software and labor for IT consultants. These “direct” costs are very real and can be significant but they only show a piece of the overall costs of IT.

Direct Costs of IT:

• Hardware
• Software
• Labor for IT Support
• Labor costs of downtime

In reality the “Real” cost of IT has more to do with how much you pay your employees than with your direct IT costs. To understand the True Cost of IT you must include the many “hidden” costs that are buried in your IT system and how they affect your payroll.

The Hidden costs of IT:

• Labor costs of poor performance or lack of capabilities
• Opportunity costs of downtime, poor performance or lack of capabilities
• Management and admin time for evaluating and purchasing products and services.

Direct Costs of IT:

Most everyone is very aware of the costs for purchasing hardware, software and labor for IT support. These are significant costs and easy to see because they directly drain your bank account. Most people also know that “downtime” costs them money and they think of “downtime” as those times (hopefully rare) where something bad happens: A server or desktop crash, Router or firewall failure, etc.

These are the obvious things that cause downtime and they can represent a large amount of money. Unfortunately even though they know about the costs of downtime few people have actually run the numbers to see exactly how much it costs.

But there are many more things related to IT that cost your business money that aren’t as easy to see. Often these hidden costs are actually significantly higher than the “direct” costs mentioned above.

In order to see all these hidden costs we need to ask: What is Downtime?

The Hidden Costs of IT:

“Downtime” when things are still running:

Downtime is anytime when your employees’ productivity is negatively affected by your technology:

• Waiting for applications to load on their desktops
• Waiting for slow web pages to load
• Waiting for pages to print on the printer
• Increased labor costs from employees not having all the features they need to be productive
• Re-creating deleted or missing documents
• Much more

All of this is “Downtime” that you are paying for! These are real costs that you incur every day! When you start to track how much of this “hidden downtime” actually occurs every day you begin to understand the real costs of downtime.

Calculating the costs of Downtime:

Let’s begin with an average employee salary of $35,000 / year. This equates to $17.50 per hour. If during a typical hour at work their workstation is a little slow (causing them to “wait” a couple of minutes) this translates to 16 minutes each day or 1 hour and 20 minutes over the course of the week. The weekly cost of these little minutes would be $23.28 and over the course of a year this would be $1,210.56. A company of 10 employees could lose over $12,000 or more just from these small daily delays!

Obviously, this does not include those times when the server or other network resources have actually crashed and are not usable.

Let’s use an example of a company with the following employees:

3 employees @ $20,000 / yr = $ 60,000
4 employees @ $35,000 / yr = $140,000
2 employees @ $50,000 / yr = $100,000
1 owner @ $80,000 / yr = $ 80,000

** Total payroll of $380,000 / year.

This breaks down to nearly $183/hr. If the server goes down for just a couple of hours this costs $366 in wages plus the cost of the computer guys scrambling to fix the issue. If the business is down for an entire day, the cost is over $1,460 plus, plus, plus. If there is even one of these short outages each month, the business loses another $4,400 over the course of a year plus all of the added fees.

There are certainly other costs and concerns with these “downtime” problems, but if you take just the two simple examples above it becomes very clear that these costs add up to a lot of money!

Some additional Hidden Costs:

There are other hidden costs related to IT that often go un-noticed:

• Purchasing and evaluating technology: The time spent to evaluate and purchase products and services costs money. This work is often performed by well paid employees or maybe even the owner of the business. It amazing how often someone spends 2 or 3 hours shopping just to save $20 on a printer. Even the direct labor associated with processing an order for IT equipment takes valuable time that could be spent generating revenue.
• Increased labor from lack of Capabilities: If your employees don’t have the all the tools they need to be productive you are paying both the direct and opportunity costs of the extra time it takes them to perform their jobs. This can add up fast. Imagine by having the right hardware or software tools your employees could save 30 minutes a day (very realistic in many cases). Using our $35,000/yr employee again this comes to almost $44/week or $2,275 per year. Just for one employee!
• Opportunity costs: As un-noticed as they may be, opportunity costs are real. In our examples above we calculated the direct labor costs associated with downtime. In reality that is only half of your true cost. The lost income that each employee would have generated with downtime is a real cost to your business and is likely more than the direct cost of the wage they are paid.

Willits Technologies takes downtime seriously. With our Managed Services we don’t just provide technology; we provide a complete process for managing your IT! Our process has been refined through years of experience and includes technical standards, best practices, and procedures. We provide “best of breed” products and services designed to minimize downtime and give your employees all the tools they need to be productive and minimize the True Cost of IT.