The real cost of digital technology in business today

The cost of avoiding disaster is $11.

If you’ve been through the ’70s, you’ll understand. If you hear the word “Ford Pinto,” the image of fire probably comes to your mind. Near the end of the rapid design cycle, Ford discovered a design flaw. The fuel tank sandwiched between the rear axle and rear bumper has the annoying problem of the fuel filler opening coming off the fuel tank in a low-speed rear crash, and exposed body bolts that could puncture the fuel tank. The result of a low-speed collision is common: fire. The most logical repair would cost $11 per car.

“No,” Ford said.

Mother Jones published in its September/October 1977 issue of at least 500 fire deaths over eight years.

One death is too many, and one life is definitely worth more than $11 per car repair.

Ford saved the tragedy, and businesses do the same thing every day, often based on false assumptions. You have done it. I have done it. Fortunately, most of the short-sighted underfunding decisions we make do not involve loss of life. In my world, we see persistently flawed assumptions surrounding technology investments.

Your spending on technology should increase. Yes, the cost per unit of measure may drop, but your business’ overall needs for technology will require more investment. The assumption, though, is that overall spending should fall. This assumption is based on a fallacy—mainly because we tend to stick to the claim that technology costs are falling. So our overall spending should come down.

Mark Hodges

Consider a simple example: storage costs. The narrative is that the cost per GB of storage is going down. The claim itself is accurate: the cost per GB of storage fell from $0.12 in 2009 to $0.038 in 2017. In theory, the total cost of storage should go down, right? This is where perception starts to differ from reality. The decline in storage prices (in this example) has slowed significantly in recent years. As with all cost-saving shortsightedness, taking this as a reason to expect lower overall storage costs is in the wrong place. Do you pay attention to the amount of data stored?

Did you know that 90% of all data that exists today was created in the past two years? Simply looking at the unit cost in this example makes your brain expect a decrease – when your storage costs are likely to increase dramatically.

“Technology costs are falling” is your brain screaming. However, as the use of the technology increases, and your business becomes more dependent on it, your overall investment should increase. But, as Tod Bolsinger puts it, “We hold on to the assumptions we’ve held for as long as possible.” Then we get frustrated because our savings expectations aren’t being met.

The negative result is that you put your business at risk.

In your world, you may feel that saving money on technology is a smart move. Your choice for a technology decision is simple: will you see it as an investment or an expense? Would you like your bank or hospital to make technology investment decisions based on your reasons? Have you checked how many security risks your decision poses? When you’re faced with a $11 decision, what will you do today, tomorrow or next week?

Mark Hodges is Chief Growth Officer at Arkansas IT Services Edafio Technology Partners. The views expressed are those of the author.

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