Calculating the True Cost of Your Information Technology

For those who may not know, I travel all over Southern California, and a good part of the United States, consulting with executives regarding IT Department performance.

At some point during these executive discussions, the subject of cost comes to the forefront of the conversation. I really enjoy discussing the cost of the IT Department because it is usually a highly sensitive area and tends to be lumped into one number.

The CFO of a distribution company in Los Angeles recently engaged me to help him with an IT department cost comparison.

He pulled up a financial statement and said, “I spent $300,000 on IT last year and I still can’t get the kind of results I expect for that kind of investment.” He proceeded to discuss how he pays so much for IT services and just can’t get reliable systems, acceptable response times, or even a plan of attack for next year’s IT strategy. He was very frustrated.

If you are familiar with an accounting chart of accounts, you will most likely find an account called “Computer Expense” or “IT Expenses”.

We dug through the statements and really analyzed the “IT Expenses” account. After quite some time charting numbers, we found a few things of interest. First, the account had ALL of the IT Expenses in it, including miscellaneous hardware, some software licenses, Internet connectivity, IT services, warranties, and a few other annual expenses.

After we identified all of the costs and categorized them, we found that he had not spent very much at all on IT management or proactive IT services. The IT function was outsourced and most of the cost was reacting to issues that end-users had during the course of a business day.

It turns out that this company WAS investing in IT - but not in the right area!

IT cost can be very confusing to figure out and compare – you have to be able to compare apples-to-apples. I find the businesses that have the IT investment formula figured out have a competitive advantage over those that kind of “let IT run”.

We'd like to help you get a handle on how to evaluate your technology costs so we're making this the topic of our April webinar - "The True Cost of Your Technology: How to Evaluate Your IT Spending". I guarantee that you'll learn something that will help you to look at your costs with more objective eyes.

As always, I’m always happy to help executives sort out their IT costs and results. If you’d like some help, click here to request a time to chat.