It may seem like the last thing you want to do in the midst of tough economic times is invest in new hardware. But IT consultant Erik Eckel suggests that trying to coast on failing or outdated equipment will cost you more in the long run.
It's no secret. Many organizations curtail all possible spending in a recession. Budgets are cut, staffs are reduced, and new hardware purchases are often eliminated. During difficult economic periods, cost-cutting measures are prudent, even necessary for companies struggling to survive. But suspending hardware investments can prove shortsighted. Eliminating system replacements and PC upgrades may well worsen an organization's predicament. Here are 10 reasons new hardware purchases shouldn't be delayed — even during a recession.
Note: This article is also available as a PDF download.
#1: Equipment still wears out
As bad as an economic recession becomes, one fact doesn't change. Power supplies, hard disks, motherboards, displays, and other components still fail. The laws of physics don't rest just because the economy is in turmoil. Electrical surges still occur, mechanical failures continue, and planned obsolescence keeps marching along. Simply put, PCs, servers, network components, and other business-critical items will fail, even in a recession. This equipment must be replaced.
#2: Productivity becomes paramount
When PCs, displays, or network switches fail, it may be tempting to visit an old parts closet to dig out replacements. Old, entry-level Celeron- or Pentium-powered PCs with 256MB of RAM and rattling power supplies won't help managers (now often responsible for production tasks, too, due to departmental layoffs) efficiently complete expanded task lists. Nor will such machines enable overworked colleagues to run QuickBooks, CRM applications, or proprietary programs smoothly. Nor will a 15" CRT enable productivity gains when replacing a 22" widescreen monitor used to display customer information alongside order entry software.
The same is true for network equipment. Outdated hubs and routers were decommissioned for a reason. They were either too slow, failed to operate properly, or didn't meet the organization's needs. They certainly won't improve productivity now, when staff sizes are smaller, remaining employees must absorb the workload of laid-off staff, and stress levels climb ever higher. The subsequent delays and inefficiencies translate to lost opportunities, poor customer experiences, and less revenue.
#3: Downtime is expensive
Older equipment fails more often. Outages and downtime are even more acutely felt during tough economic downturns, when fewer staff are available to diagnose the failure, identify appropriate fixes, obtain replacement parts, replace the failed component, and then test the repair.
Meanwhile, other employees facing more burdensome task lists are dead in the water. Their productivity drops to zero. Depending upon the situation, a single failure can prevent employees from accessing CRM systems, entering sales, billing clients, printing invoices, answering customer inquiries, processing claims, dispatching service personnel, and otherwise fulfilling critical operations. Sales plunge, revenue is lost, and an organization's financial standing declines.
#4: Competition suffers, too
When respected economic experts, including Berkshire Hathaway's Warren Buffet, reveal that they believe growth opportunities exist in a tough recession, your first reaction may understandably be disbelief. Fortunately, though, there are arguments to be made that recessions provide a foundation from which well-managed and well-positioned companies can prosper.
Your competitors are suffering, too. If your organization can leverage their weaknesses during turbulent economic periods, it can capture rivals' market share. Exploiting weaknesses and maximizing opportunities in tough financial environments often isn't possible, however, without the proper systems. And hardware investments are usually required to power such systems that enable taking advantage of unique opportunities.
#5: Manufacturers offer discounts
Just like everyone else, computer manufacturers are facing hard times. Fourth quarter U.S. sales were off 3.5 percent. A January 2009 Time magazine article questioned whether the PC market will ever completely recover.
Manufacturers are scrambling to develop intriguing new product lines (witness netbooks) and improved, more cost-efficient distribution (including via layoffs and new strategic partnerships). In the interim, deals are available for the taking. Organizations shouldn't feel obligated to pay a posted online price (even if already discounted) for a new PC or pay the first price presented for a new bank of rack servers. Due to current economic conditions, sales representatives are more likely than ever to rework pricing for corporations needing new equipment.
#6: Consultants are more willing to negotiate
Many IT consultants are also now willing to negotiate project pricing (including passing along to clients hardware discounts they've negotiated as resellers). Project estimates prepared and delivered even six months ago may well possess more attractive pricing today.
While many IT consultants become even busier during recessions (since many organizations choose to lay off in-house staff and outsource technology services), that's not universally true. Many consultancies may have lost clients (who have closed shop, merged with other organizations, or cancelled or reduced service contracts). Still others may be seeking to diversify their client base or avoid layoffs of their own.
#7: Running older hardware longer costs more
Trying to squeeze a few extra years out of PCs or servers actually ends up costing organizations more in the long run than does replacing old equipment. According to Info-Tech Research Group lead analyst Darin Stahl, "When you look at costs — particularly around a four- to six-year life cycle — it may seem like you are saving money, but really it's costing you, because you are going to increase your support costs."
Yankee Group Research Inc. research fellow Laura DiDio concurs. "One of the classic mistakes is [being] penny-wise and pound foolish. Some companies are not prescient enough to say, ‘I'd better keep good records and do regular inventories and asset management to see which servers, of which groups of power users, might need to be upgraded or refreshed sooner than others.' "
In a January 2008 Channel Pro magazine article, in which organizations are encouraged to replace 25 percent of their systems every year, author Carolyn Heinze added, "In the long run, these older systems wind up costing more in lost efficiencies, compatibility issues, service and maintenance, and downtime."
#8: Interrupting purchase cycles is expensive
By replacing a quarter of an organization's PCs every year, for example, companies ensure critical employees receive new, faster, more reliable equipment annually. Then, the critical employees' systems can be handed down to the next tier of operations staff. In short, using this method, every employee receives a hardware "upgrade" every year, and no system is ever more than four years old.
Interrupting such purchase cycles is expensive, and not only due to the lost efficiencies, compatibility issues, and downtime costs. If an organization waits longer to replace the majority of its users' systems, out-of-pockets costs spike (instead of remaining steady). Pay now or pay more later. That's the moral of this entry.
#9: New applications require greater resources
Many new technologies — everything from new versions of accounting and bookkeeping software to CRM tools and new server platforms, such as Windows Small Business Server 2008 — have greater hardware requirements than the older platforms they replace. Windows Small Business Server 2008 won't even run on 32-bit servers; the popular small business server OS now requires 64-bit hardware.
Organizations are being forced to upgrade system hardware, as programs become increasingly sophisticated and as Microsoft's desktop operating systems demand more computing power. Windows XP, for example, required only a Pentium 233-MHz CPU, 64MB of RAM, and 1.5GB of hard disk space, whereas Windows Vista Business' hardware requirements call for a 1-GHz CPU, 1GB of RAM, and 128MB video RAM, along with 15GB of free disk space. Companies that choose to suspend hardware investments subsequently automatically forfeit the time-saving, cost-reducing advantages many new software applications deliver.
#10: Employee retention remains a consideration
Good employees are as valuable as ever. Even though the pool of potential replacement hires grows with the unemployment rate, the cost of locating and training new staff remains significant.
When a good employee leaves an organization, his or her department often experiences a slowdown while a suitable replacement is recruited and trained. Worse, vast institutional knowledge can be lost when the veteran employee leaves, never to be replaced.
Fortunately, hardware investments are among the elements that can improve job satisfaction. Rewarding valuable employees with new (faster, more reliable, more modern, sleeker) equipment can go far in reducing frustration, while also confirming an employee's value and contributions. Awarding new PCs to key workers critical to ongoing operations is a simple step. Best of all, productivity gains usually result, as well.
Erik Eckel owns and operates two technology companies. As a managing partner with Louisville Geek, he works daily as an IT consultant to assist small businesses in overcoming technology challenges and maximizing IT investments. He is also president of Eckel Media Corp., a communications company specializing in public relations and technical authoring projects.