A few weeks ago I plunked down $55 each for my children to join the Little League baseball team in my local community. I figured that's about all we'd have to pay. A few days later I came out of Modell's, a sports supply retailer, and spent $200 on bats, cleats, cups, gloves, and balls. I could have spent more -- much more.
As I paid for everything, I realized this is what small businesses often go through with their technology purchases.
There are hidden costs of technology.
Here’s an example: You realize that your company's 15 computers are running very slow and decide to buy new ones. Let’s say you have spent $1,500 on each computer for a total of $22,500. Unfortunately, Windows Vista, which came bundled with each computer, is not compatible with the customer relationship management (CRM) software your business uses. You now have to upgrade that software and get new licenses for each employee using it. The new CRM software is different than what you’ve been using, so you plunk down some more money for training. See how the hidden cost of technology works?
Let’s look at another example. You’ve been sharing three black and white printers in your office for years and you finally invest $1,000 each on two new color laser printers. Here’s how the hidden cost of technology could creep in. Instead of using regular copy paper, like you did with your black and white printers, you need to purchase special glossy paper to make your color prints, so that those killer, “must win” presentations come out perfect. Instead of paying $87 for one black ink cartridge, you now need to ay $97 for color cartridges. Your local technician also tells you that repairs are going to be more expensive.
When you consider purchasing technology it's important to carefully consider what the hidden costs will be. It’s easy for your eager sales person to give you the base or immediate cost of the technology. What you want to do is grill the sales person or your consultant and find out what the projected or hidden costs will be for the next year and, if possible, the lifetime use of the product.
Hidden costs of technology will also be affected by the growth and changes in your own business.
You purchase a phone system made for up to 20 users and six months later you grow to 100 employees. Your phone reseller tells you that your current phone system has reached its growth limit and you’ll have to buy an entirely new phone system to accommodate the new growth. If you would have considered your growth, you would have saved money by not purchasing a limited phone system in the first place.
Hidden costs of technology will also be affected by how the use of the technology changes over time.
Often, I’ve had people tell me, when asking me for my advice on purchasing computers, “Ramon I only want to do email and browse the Web a bit.” A few weeks later, they’re asking me why they can’t run video applications or their hard disk is full. Why? They purchased the cheapest computer they could find, which could not handle programs which take large amounts of memory and hard disk storage.
Your business is no different. Don’t try to save money, needlessly, buy purchasing the cheapest technology, only to have to upgrade and possibly waste your initial investment later on.
Here are some hidden costs of technology to watch out for:
Digital waste -- You can’t “throw away” 15 computers like you can a piece of paper. You might have to hire a company to get rid of your technology hardware.
Training -- Maybe you’ve switched over to some new and free software. Do you have to pay for training and installation services?
Down time -- When technology works, everyone’s happy. But when it does not work you can waste a lot of time doing nothing, while the “technology” gets fixed.
Lack of automation -- Do you have to spend your day backing up, archiving email, filtering out spam and other tasks? If so, most likely your technology is not as automated as it should be.
The Wall Street Journal recently wrote that for many people who buy a house as an investment, it’s really not an investment due to the hidden costs of upkeep, taxes and mortgage insurance. Technology’s hidden costs are very similar. The initial costs look appealing but if you do not consider what the potential hidden costs are you could end up paying more for the technology than you originally anticipated.
This is the way it can be with technology if you’re not careful. You purchase a $5,000 CRM system, only to find out that with training, installation and support, you are paying more for it than you really thought. That's fine if it winds up helping your business grow and increase revenues. But if your customers hate the new system and your employees refuse to use it, then you’ve really wasted your money.
Ramon Ray is an author, speaker, technology writer and former small business technology consultant. He publishes Smallbiztechnology.com, a website that helps small and medium-sized businesses strategically use technology as a tool to grow their businesses.