Understanding IT Economics and how to apply the knowledge of costs and benefits of managing IT assets has become a service within itself. The definition of economics is the study of how people use resources and respond to incentives, or the study of decision-making. IT Economics is similar. It is the study of an IT environment to determine the most effective technical and economical solution for a business.
Reducing IT costs and simplifying operations while meeting business demands are the major criteria that all companies, large and small, look to attain. To perform an IT Economics analysis, a Forrester Research study shows that the primary focus should be on business value, financial return, efficiency, and process improvements. To be followed by customer satisfaction and cost reduction.
IT is one of the largest indirect costs in nearly any business, so helping business leaders spend wisely and ensure they receive appropriate value for their investment enhances an MSPs service offering. To effectively appraise IT Economics, MSPs must apply analysis, perform data-driven assessments, and engage in strategic thought processes to identify IT efficiencies and/or deficiencies. Every client’s assessment will be different based on their data, costs, and requirements. Five points of consideration when assessing and creating an IT value proposition are:
- Operating costs. Consider capital expenditures, server upgrades, maintenance, etc.
- Business values and quality of service (security, resiliency, serviceability)
- Workload consolidation, server utilization, and performance efficiencies
- Return on investment and payback period
- Total cost savings
It is imperative to be able to articulate IT value and costs. When a CIO must measure her spend and provide metrics and findings to the CEO to explain increases or expensive technology functions, the CIO will look to the services provider. The MSP should be able to aggregate the financial cost pools such as labor, software, hardware, and outside services, and then conceptualize the information into a demonstration of the value of the investment.
IT is the driver for a very large segment of the global economy, with global spending reaching $4.8 trillion in 2018. That spend will be awarded to those who can communicate the true costs and business value of proposed IT investments.
For an interesting look at global IT Economics, check out TechJury’s infographic that includes industry statistics, key segment trends, and what the big IT companies are concentrating on. Click here to see the graphic.