The SMB IT money pit – from ITPro UK

ANALYSIS & INSIGHT 4 Apr, 2013 Stephen Pritchard

Inside the enterprise: A staggering proportion of SMB IT spend might be wasted. Is IT being mis-sold?

Managing an IT budget efficiently is never easy. For smaller companies, it can be close to impossible to ensure money spent on IT is money well spent.

The costs of hardware, security, software licences, hosting and services all add up. Even a relatively small firm, with around 250 employees, might be dealing with as many as a dozen IT suppliers.

Is that far fetched? Not at all. Take a look around a typical small business employing – just to make it simpler – mostly knowledgeworkers.

There is the desktop and laptop hardware: Dell, HP, Lenovo or Apple perhaps supply that. There will be tablets: Apple, again. Smartphones? Let’s assume Samsung. But the finance director still has a BlackBerry.

IT directors might like managing large budgets, but the business is more likely to spend wisely, if it is picking up the tab.

There is Microsoft for Windows and Office. Symantec, McAfee or Sophos for security. There will be some networking: for the sake of argument, pick Cisco. A physical server, or more likely, several of them: IBM.

Storage could be from any number of vendors, from Netgear or Iomega to NetApp or EMC. A back up power unit – you really should have these – takes it up to a round 10.

Bring in someone to install or maintain it, and an offsite backup – you really should have one of those, too – and it’s a dozen.

And that’s before adding accounting software, ERP or CRM, for example, or going anywhere near the cloud. Drawing a diagram of who supplies what to a small firm is like unravelling a plate of spaghetti.

Small company finance directors could be forgiven for thinking they may as well follow the lead of 80s pop group The KLF and burn a million pounds on a remote Scottish island.

Recent research by SolarWinds, an IT management tools vendor, appears to back up the suggestion that smaller firms are overwhelmed by the complexity of IT. As a result, much of their spending is wasted.

According to the company, 87 per cent of firms admitted to paying for software they never used; 28 per cent said that as many as a fifth of licences are wasted. Despite, or maybe because of this, IT spending by SMBs continues to increase.

Overspending, or wasted spending, may be slightly less common, because it is more visible, but it is still a problem. There are plenty of firms that buy more desktop or laptop PCs than they really need, and more still that over specify servers.

One solution could be to rip out all the IT and move to the cloud; another is to embrace BYOD – bring your own device – and either expect staff to provide their own computers, or give them a budget for buying them.

Neither solution is entirely practical for most companies. But there is another solution: make business units pay for the IT they use.

IT directors might like managing large budgets, but the business is more likely to spend wisely, if it is picking up the tab.

Stephen Pritchard is a contributing editor at IT Pro.

Focused on TBM, Technology Business Management ("run IT like a business"). - 30+ years of experience, in providing IT strategy, process, application, RAMP, hardware, software, network, internet and cloud solutions to financial services, MRD and high technology companies from startup to F500. - 20+ published articles on the intersection of business and technology. - Startup advisor and mentor to a dozen startups, four of which were acquired and one of which is newly-launched (ITconnecter, a Crosswaves Ventures LLC company). - Specialties: IT Technology Business Management (TBM, aka "run IT like a business"), strategic partnerships, technology innovation, solutioning and program/project management (onshore, nearshore, offshore). Technology consulting focused on innovation, built around process, data and integration (cloud, social networking). We use I/TBM financial management best practices to help mid-size and large enterprises ensure they are meeting the needs of their business effectively and efficiently.

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