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Convincing Your Boss to Buy New Equipment with Finance Math

by Team Nuggets
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Published on September 15, 2017

One of the most difficult annual chores for an IT manager is setting a budget and explaining to executives the importance of large upgrades. These large upgrades, such as new equipment or development costs, are often rejected quicker than it takes to define the budget, but it's often to the detriment of the organization.

Spiceworks surveyed 900 IT departments to find out just what they were building into their budgets. The results showed that IT organizations, on average, have the same budget for 2017 as they had in 2016, which indicates that upper-level management is not willing to spend much more than what is needed to keep the organization running.

It's management's job to explain the importance of high-cost equipment in order to include it in the annual budget. The only way you can get that budget is by using old-fashioned finance math.

Performance vs. Costs

Most upper-management executives don't understand that performance can cost a huge sum of money in both downtime for the network and as an obstacle for end users. Let's say that it takes an employee an hour to perform a task because of slow network performance.

With faster access, it takes the employee 30 minutes. If this is an everyday task, that's 2.5 hours wasted on performance. Multiply that by the employee's hourly rate, and that's wasted money on performance issues.

If you can make your team more efficient with technology, then make that case with math. Note that performance issues impact more than just one employee so that this cost can add up to a huge sum. The wasted money is usually much more than what it would cost for the upgrade. This simple math will sell your upgraded hardware with little effort because most executives will see huge savings from a performance boost.

Once you use your finance math, CBT Nuggets trainer Jeremy Cioara can help you build a network plan.

The Cost of a Data Breach

Most organizations disregard cyber security as lovely to have until they are the victim of a data breach. The average cost of a data breach is nearly $4 million as of 2017. Executives often don't understand the impact of a data breach, and the aftermath can be even worse with lawsuits that roll in after customers find out that their identities have been stolen.

Most organizations have a value for each customer, which should cover the cost of protecting their data. It's a mistake to go cheap on cyber security because even a small company is a target for hackers.

Many small organizations disregard cyber security because they think they are too small for an attacker to care. Because of this common attitude among small businesses, they are actually an easier target for attackers rather than fully equipped larger businesses.

The most vulnerable part of your network is your end users. Your IT staff has probably completed some security training, even if it's just the security portion of Network+ or CCNA. If not, then you can start them down the right path.

But your users are on the internet, potentially opening your network up to attack. Remember to equip them with end-user security training or at least give them a few tips to keep them (and your network) safe.

With an average of $3.62 million for a data breach, you should be able to convince upper management to invest in better security software, hardware, and training.

Supporting Old Technology

It's expensive to uproot your old applications and servers for newer technology. Usually, the overhaul costs a lot, and it's left for another year. Large organizations keep old technology in production because it works, but sooner or later, it becomes more expensive to support this technology than to replace it with new infrastructure.

After all, you might be ready for the cloud. No. The cloud isn't the solution for every IT department or every application, but it's something to investigate.

For instance, General Electric still supported a 61-year-old server until they moved the applications to a hybrid cloud with Docker. You probably don't have anything that severe, but "just because it works" shouldn't be the reason to keep it.

Just because something is new isn't a reason to invest in new technology. Many departments are waiting for Server 2016 to mature while keeping their stable Server 2012 R2, which is fine. But the time will come to upgrade, and you must ask for the budget. Get your numbers ready.

Presenting Budgets to Executives

It'll take some projections and calculations to determine initial costs versus savings investments. In IT, the initial costs are usually high, but the cost savings are usually seen within a few years. You must calculate and present these costs to have your budget approved. It's a common misconception that if you're putting money toward innovation, you might need to slash other budget areas. That's not necessarily true. Not in finance math.

For instance, help out the accounting department and determine the useful life of the equipment. Divide that by the cost; once you know the valuable life, you'll get the amortized expense. While it might be a considerable expense upfront, your company can deduct the amortization from its assets for years to come.

Finally, remember to account for unforeseen expenses. Always increase the budget by at least 10 percent to account for hurdles, extra staff, and any unexpected costs that might come along. A reasonable budget can save a corporation millions of dollars in poor performance and outdated technology.

It all comes down to IT being an expense for the organization versus departments that generate cash. When money is allocated, it's often given to the department that can use it to build even more revenue.


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