July 16, 2015
This apparently simple and innocuous question is actually one of the more potentially controversial ones of the modern commercial environment.
History of Spend
For many decades, within Information Technology, it has been assumed that much hardware and software is, broadly speaking, effectively obsolete and in need of replacement after about three years.
You can see evidence of this in accounting policies, where many organizations will insist on depreciating IT technical assets over only two or three years as opposed to the five or 10 years that may be more normal practice with other longer-term capital investment items.
That’s because they know that their residual value after three years may be pretty much zero.
What this means for many businesses is that technology is an on-going large-scale expenditure that they feel they are trapped in.
If they choose to do nothing, then they run the risk of their technical people walking in one day and saying the business is about to grind to a halt because their obsolete kit is failing. Yet on the other hand, the ratio of their near constant IT expenditure to business profits may be unsustainably high.
What’s driving this?
Certainly, the sheer pace of change within technology is an issue.
Equipment that may have been technically capable of coping with business requirements one or two years ago, may simply now just not be capable of doing so if the company is making hugely increased demands upon the technical infrastructure.
A good example might be some form of router device that was perfectly adequate two years ago for voice and some data communications but which now is totally out of its depth when trying to deal with extended video and video conferencing type requirements.
This type of challenge is sometimes called the ‘scalability’ or ‘sizing’ issue.
Then there is the problem of ‘planned obsolescence.’
This is hugely controversial and isn’t only restricted to the field of information technology of course. It involves the assumption that whereas in the past manufacturers would have built their equipment to last theoretically four, five, seven or even ten years, today they’ve realized that is not in their best interests and now their boxes all mysteriously seem to start to fail after two or three years.
Certainly there is some evidence that this is an issue in areas such as domestic white goods though the picture within IT is harder to gauge.
What’s the Truth?
It’s almost impossible to say for certain if manufacturers are now intentionally incorporating a degree of planned early obsolescence into their hardware and software.
Many IT old-timers will tell you anecdotally that boxes purchased in the 1980s or 1990s that could at the time have been safely assumed to have a lifespan of perhaps five years, have now been replaced by devices that seem to start ‘blowing up’ after only two or three.
Of course, it is certain that more and more basic business functions now heavily depend upon IT and as businesses change rapidly in line with the ever-faster modern business world, the demands for new power and new functionality from IT to support that are increasing at a faster rate than ever before.
Is There Anything That Can be Done About This?
Simple one-line answers just aren’t available.
All that you can do, as a business, is to make sure that your IT Department has a hard philosophical focus on longevity, reliability and business cost-justification rather than a predisposition to always go for the latest box just because it happens to be available.
If you feel you’re not getting that in-house then find a specialist provider of IT Business services that can do it for you.
Ultimately having some form of business analysis function integrated with and arguably even leading your technology department should provide a degree of earthy grounding that might be necessary if your IT costs are not to escalate out of control.
Vikas Sood is the CEO of Server Sentry which helps small businesses in Melbourne get the most out of their business.