DEALER VIEWPOINT - Counting the cost of IT

PCs can't be treated the same as other budgetary elements.

The fact that computers cost more to run than their purchase price is a recognised fact. However, the challenge comes in measuring these real PC costs.

This problem is compounded by the fact that IT costs are assumed to fall within the IT budget. This may be true for traditional mainframe sites, but it is seldom the case for complex PC networks.

Broadly speaking, true costs can be split into three areas - budgeted, hidden and lost opportunity. The first of these is the most obvious and involves those costs allocated by the central IT function - including project work and ongoing support. But the true cost of supporting an IT system often goes beyond the boundaries of the IT budget.

One of the hardest hidden costs to measure is the ad hoc support that users give each other. In many cases, reducing costs by cutting helpdesk support has a knock-on effect, placing the support costs elsewhere. It may seem cheaper to employ in-house support staff rather than outsource the function.

For example, an IT manager with a finite budget, paying for an external resource, doesn't seem to be a cost effective solution. But, a financial director would recognise that outsourcing this function could reduce the overall cost through cutting management overheads, cost of premises etc.

Measuring these costs is not entirely impossible. Accountants and management consultants offer a company-wide cost measurement system which is founded on activity-based costing (the time each employee spends on a task). But, this does not provide a focus on IT-related activities. An activity-based costing approach is required for this. This is one that looks at who is spending how much time on supporting, running or writing computer systems.

Users aren't necessarily writing full-blown Oracle applications, but even a simple Excel macro written to overcome the backlog on the IT department has its cost. A total cost of ownership (TCO) engagement, designed to measure these costs, can prove invaluable as a base to measure any improvements.

Lost opportunity costs are harder to identify. An obvious, though unlikely example would be delaying the year 2000 compliance project because of budgetary constraints. If there is a choice between implementing the year 2000 project or improving the decision support system for management, which one can wait?

The price of running both may be high, but then what is the cost of not running either? IT and finance directors need tools to help them understand which of their actions lower, and which of them raise the total cost.

Some form of measurement of these costs is the only way for a company to run efficiently. There are products which focus on reducing the total cost of ownership of IT resources throughout the IT life cycle. A TCO engagement is designed with this cradle-to-grave approach in mind.

Mike Boreham is services marketing manager at Info Products.