Can Cheap Be Expensive?
Have you ever bought a cheap shirt, belt or pair of shoes and one week later cannot even bring yourself to look at them? So you go out and buy more...and more...and more until you finally tell yourself, "this is crazy".
A BMW, Audi, Lexus or any quality vehicle is "expensive" until you try selling it five years later and find out how much return you are getting from the sale and it quickly becomes a good buy. You can hire a decent attorney and spend two years in jail, or a great one and have the other party pay you damages.
A cheap accountant will do your book-keeping and the IRS will help you straighten it out, but a quality accountant will make sure your books are done right. A quality architect will rather die than produce shoddy work while a cheap one would have you remodeling in six months. When you work with a quality real estate agent, the cost of the property is hardly an issue, as opposed to looking for a new property soon after when you don't. A part can fail on a quality server and it keeps working with a warning about the part that failed. A bargain server will completely shut down without warning.
The one characteristic found in quality products or services is the value they bring to your environment.
Cheap IT Investments Can Be Expensive
What makes businesses work today is the use of technology.
After ten years in direct information technology management for a small company, I can attest to what I often heard from my peers: cheap can be expensive, and sometimes very much so. This is in relation to business owners and managers who insist on spending the least amount of money in areas that are critical to the day-to-day functioning of their businesses. Those who go the other route by purchasing quality products, can tell you that the difference is just amazing.
That is because the short-term savings achieved by purchasing cheap products or services often quickly become long-term astronomical costs. Of course, there are a lot of reasons why we buy lower-costs goods or services- shortage of cash, desire to meet short-term objectives like improving quarterly profits or availability. But in most cases it is the focus on "cost" rather than on the value of the product or service that drives the decision to buy cheap.
In technology, this is no more than a recipe for a disaster waiting to happen. Short-sighted IT decisions are particularly troublesome because of the long term consequences. After all, the manager who purchased the cheap PCs that are falling apart six months later may no longer be with the company so the health of that business is now somebody else's problem. Even worse is when executives find themselves fixing these computers.
There are two areas where business owners need to guard against short-term thinking regarding their IT environment:
1. Under-investing in IT:
It used to be a necessity in most cases to squeeze IT budgets in the past without regard to maintaining balance. These deep reductions are now catching up with companies to the extent that they now need major upgrades to their IT infrastructure. For example, there are still a lot of businesses out there running core systems on old technology (Windows NT4 and Server 2000, to mention the most common) that really should be replaced. But the lack of ongoing investments in IT now make such upgrades so expensive that they cannot afford it. The result is that the business suffers and employees are usually frustrated.
2. Offshore outsourcing.
Many companies are sending IT work offshore or overseas because of cheap labor. That may save money on the short-term, but there are communication and collaborations problems with those arrangements. It is also internally destabilizing because of the defensive and protective stance usually taken by in-house IT personnel. The result is that important issues are usually left unaddressed.
The way forward? It's all in the numbers. Sit down and perform a five-year total-cost-of-ownership (TCO) and return on investment (ROI) analysis on the product or service. For example, the long term cost of a cheap PC may be more than that of a more expensive unit because the acquisition cost of the hardware is only a fraction of the full five-year cost, especially when you estimate the enormous amount of time that will be spent on fixing the computer, ordering replacement parts etc.
There is no magic. Successful companies do things that mediocre companies do not. Today's fast-paced business environment demands that we start thinking long-term and move away from tactical, day-to-day concerns.
To your success.
Look out for our next article: "Stop washing your own car!".
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