What’s the true cost of innovation in IT?
Are limited budgets for IT solutions costing your business Innovation? It’s time to take a look at in-house, cloud hosted, and “do nothing” options.
One of the major challenges in the IT industry is how to constantly implement changes in software applications, both old and new, while keeping costs minimized. The pressure for cost reduction often stifles the fundamental innovation required for businesses to successfully differentiate themselves. Businesses often approach their IT problems in 3 ways: Build a Custom Solution In-house, Rent a Cloud-based Solution (SaaS), or do nothing. It is imperative for businesses to find the right formula to acquire innovative and customized solutions within budget, without sacrificing control.
Build a Custom Solution In-House
Decision makers in business must always account for time and money before making an initial investment. This strongly applies when deciding to deliver new applications and customize packages. Several cost drivers occur during development, maintenance, and operations of applications; not to mention the extended budget required for unknown and unpredictable changes. Changes during hand coding development are slow-moving and complex, and will only become harder to implement as the application progresses to its first version. These cost drivers of change are not limited to the time the application / systems go live, but will eventually transpire in its “Maintenance” mode thereafter.
According to Gartner’s study, “A Framework for the Lifetime Total Cost of Ownership of an Application”, 42% of the initial costs will be spent annually, and consistently throughout its lifetime, just for maintenance. Any enhancements, corrections, extensions, updates or upgrades can result in increased maintenance costs.
Consider a $200,000 application being built today. By next year it will cost, on average, $84,000 (42% of initial cost) annually to maintain, totaling $620,000 in the next 5 years (3.1x initial cost). The lifetime (15-year) cost to maintain and operate such an application could amount to $1,340,000 (6.7x initial cost). If your IT budget is ill-prepared for such longitudinal costs, then an in-house option may not be a strategic fit.
Rent a Cloud-based Solution (SaaS)
With the newly abundant availability of software-as-a-service (SaaS), companies across all industries are increasingly “renting” cloud-based application solutions. SaaS applications already in existence can be used “as-is”, and may limit the specific and unique functionalities a business requires. However, options for customization and extensions may be available, depending on your SaaS provider. For either option, businesses who choose Cloud-based solutions benefit financially by eliminating those high initial development, maintenance, and operational costs. Financial planning also becomes more stable with predictable monthly or annual costs. If your business and in-house IT wants to refocus on more pressing projects, without delaying innovation, then consider the extension to an outside IT team of experts through a Cloud-based Solution as an option.
When resources of time and money are limited, and when options to build or buy are unavailable, businesses and IT often resort to not doing anything at all. By doing nothing and denying business solutions, naturally, no costs are incurred. However, this option decreases the relevancy of IT department, and adverse problems, eventually, will arise elsewhere.
Trapp Technology’s Cloud
Your approach to IT solutions should align with your business’ priorities. Maybe having full control is worth the initial investment and long-term maintenance costs. Or maybe doing nothing and saying “No” is the best option for your business at the moment. But perhaps, having the flexibility to extend your IT staff externally could save valuable time and money while maintaining control. Services such as Trapp Technology (www.TrappTechnology.com) offer Full Featured Cloud Application Hosting while working directly with you to customize solutions based on your unique requirements. Ultimately, the right approach will depend on how your business and IT department values innovation.
Read more articles for Small Business: