IT Is Not a Cost Center - Bad IT Is

You've heard it plenty of times before in varying formats: "The IT department costs so much money and doesn't generate any revenue." In fact, small companies(those under $50M in revenue in the study), spent almost 7% of their annual budget on IT. That sounds like a lot, generally because most people tend to view IT inappropriately. When utilized correctly, IT is not a pit to pour money down, but a way to magnify the efficiencies of other departments. Technology provides unparalleled amounts of leverage for maximizing productivity of other departments, especially those in professional services.

That seems straightforward in theory, and on the surface many people might agree. The complication is getting this to play out in the real world. From my experience, the issues arise from two main things. The first is having overwhelmingly incompetent people in IT in the first place. The second is the lack of understanding of management about the capabilities of technology, coupled with the ignorance of other job functions from IT professionals.

The issue of incompetent IT professionals can be difficult to avoid, especially for people that are largely non-technical. This often occurs in businesses like car dealerships, small manufacturing companies, and non-profit organizations. I've heard of a set of car dealerships where the IT guy literally burned data onto CD's and drove them to other dealerships on a routine basis because there was no VPN's in place that allowed the transfer of data between locations. With incompetent people in place managing and developing the systems, things will fail, and it will cost money. This one is self-evident, but somehow still ignored and overlooked. Some key things to look for are the inability to translate technical stuff into normal language, and anyone who doesn't try to automate themselves out of a job. Feel free to review my other article about hiring good IT people for more ideas.

The nature of IT lends itself toward automation and advances in efficiency, and anyone who continues to do manual tasks that should be automated is likely not qualified for the position. One common item in that category is system backups, including off-site replication. With off-site storage as cheap as $5/TB/month through companies like Wasabi, there is no excuse to be manually backing up to USB drives every day and physically taking them off-site.

This transitions into the second point: Management generally doesn't understand the incredible scale at which IT can provide automation. If you have staff that commonly take data out of one system, say an inventory system, and manually create reports out of it every week/month/quarter/year, that can likely be automated. Many systems, including those online, have API's now that allow this kind of access for data. If you have anyone that performs a repetitive task on a computer, I strongly encourage you to look into ways of simplifying that. Just be aware that the IT professional generally isn't going to bring this up. They are unaware of the in depth workflows that everyone else follows. It is on the responsibility of management to bring the IT department in and ask, "Can this be automated?"

Lastly, understand how investments directly in IT can massively increase the productivity of your company as a whole. There's going to be a little math here, so please don't glaze over. Let's say that your company is running on out-dated servers, from about 6+ years ago. They are slow, running on old spinning drives, and all of your staff often have to wait several seconds for things to load, every time they click. Let's also say that you can upgrade your old server to a new $15k virtual host with solid state drives to run all your servers, which is perfectly reasonable for most small companies under 100 people. That shiny new server decreases load times for everyone using the system. This new efficiency saves your company 1% of your employees time per day. 288 seconds per 8 hour shift. Not a big deal, until you multiply it by 100 employees. Per day. In just a month, you would have gained 176 work hours from those 100 employees from shorter load times. Multiply that by your hourly cost, and it'll probably pay off the server within the quarter. In the remaining 3 quarters of the year, you'll have a 300% ROI.

The same math can be done for remote management systems, proactive monitoring, and high availability clusters. When used properly, IT should make you money, by allowing the rest of the departments to operate more effectively. Have questions on how this can work for your business? Feel free to comment and ask.