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In today’s world, IT is an investment, not a cost

admin December 1, 2020 0 Comments

IT is not a cost centre.

IT is an insurance centre.

Most businesses believe that IT is a cost centre. It is an aspect of the business that requires expense to prevent bad things from happening.

Janitorial staff are a cost centre. You have to pay your janitors or your floors, garbage, and bathrooms will be dirty.

Maintenance is a cost centre. You have to pay your maintenance staff or the walls, machines, and lights will be in disrepair.

IT is not a cost centre. If you fire all your IT personnel, the world will keep on spinning. The servers might need to be rebooted, but unless something happens, everything will keep on keeping on.

Now, from a different perspective…

There is a correct amount of money to spend on Janitorial staff. You have a certain amount of dirtiness that needs to be cleaned up and that will be covered by X employees providing services cleaning. If you hire 1/2 of X, then the building won’t be terrible, but things won’t be great. If you hire 2X, then most things will be spotless most of the time. If you hire 10X, there won’t be much improvement over 2X. So, the sweet-spot on spending for Janitorial staff is ~ 0.8-1.2x.

The same applies for maintenance staff.

But the same does not apply for IT staff.

If you give a single IT guy a budget of £100,000 per year, he/she can provide a certain portfolio of solutions.

If you give a single IT guy a budget of £1,000,000 per year, he/she can provide that portfolio, plus have a couple of on-staff support personnel, a contract for as-needed special staff, and some cloud workloads.

If you give a single IT guy a budget of £10,000,000 per year, he/she can provide all that, and have an onsite and cloud-based datacentre presence, rotating automatic backups, redundant staff to cover technical “knowledge silos”, etc…

Why spend £10,000,000 instead of £1,000,000 then? The business was running fine at £1,000,000 per year on IT.

IT is an insurance centre.

Businesses pay more into IT to mitigate the risk that an IT-related failure or IT staffing failure (or death or dismemberment) will hamper business productivity.

Only have 1 IT guy? What’s the financial risk to the business if that 1 IT guy dies and no one knows what is going on? How many days will it take for £_outsourced_contractor to get up to speed to be able to fix things?

Only have servers in 1 location? what is the cost to the business if that 1 location is destroyed by a meteor? What is the cost to the business if that location loses power and is offline for 6 hours? 12 hours? 72 hours? 3 weeks?

Now, what is the cost to completely mitigate that risk?

What is the cost to hire a 2nd IT guy whose job it is, basically, to be a body-double for the first IT guy; to generally be up-to-speed and ready to take over if the first guy dies/quits/whatever?

What is the cost to establish and operate a 2nd datacentre with geographic redundancy, replicated/tested backups, etc…?

Now…

£A = cost to the business of £RiskyEvent happening

£B = probability of £RiskyEvent happening

£C = £A * £B. (call this proportional cost).

£D = Cost to mitigate the risk entirely. (hire extra person, build extra datacentre, etc…)

Ultimately, the purpose of IT in an SMB is to tell the business owners or executives “Is £C more or less than £D”?

If £C is more than £D, then it becomes IT’s role to mitigate £C by implementing £D.

If £C is less than £D, then it becomes IT’s role to look at ways to mitigate £RiskyEvent from happening, lessening the impact of £RiskyEvent, or trying to reduce £D.

IT is an insurance centre.

It is IT’s job to make risks associated with computing not impact the business.

i.e. “What is the risk we lose these files?”, “We should back them up

offsite to mitigate that loss. “

i.e. “What is the risk we aren’t competitive because we are using old, outdated software?”, “We should mitigate that lack of competitiveness by obtaining the best software for our field of business.”

i.e. “What is the risk we open ourselves up to a lawsuit because someone hacks into our servers?”, “we should mitigate that probability by implementing and hardening firewalls”,”We should mitigate the potential impact of data leaks by encrypting stored sensitive files. “

i.e. “What is the risk that …. … … “, “We should mitigate that risk by … … … “

IT is an insurance centre. IT is not a cost centre.

In today’s world, IT is an investment, not a cost