Business technology has become so complicated that it’s practically a foreign language to most decision makers. Businesses must trust their I.T. staff or service provider to make recommendations and provide guidance when making purchasing decisions. Sadly, businesses often overspend or make unnecessary purchases simply because they don’t understand the technology well enough to make informed decisions. There are, however, some common mistakes businesses can avoid by simply being aware of them and knowing the right questions to ask.
As the world has shifted to subscription billing models, businesses are hyper-aware about their monthly recurring cost commitments. In response, many software vendors and solution providers try to bury these costs by billing them on an annually recurring basis instead. Naturally, since the invoice is only paid once per year, those costs are not top of mind and not factored into the budget as easily. Occasionally, businesses also make the mistake of assuming an annual cost is a one-time expense if it’s not presented clearly.
When purchasing software, I.T. services, equipment, or any other technology-related expense, some important questions to ask are:
- Is this solution billed to me monthly, annually, one-time, or otherwise?
- If this is a one-time cost, what is the expected lifecycle of the product? (i.e. How long before I need to replace it with new?)
- What is the total cost of ownership of this product? (i.e. Will I need to renew a warranty during the product’s lifecycle, and what will that cost?)
Switching services between competing products or services is easier than ever. In response, many software vendors and solution providers “build a fence” around their customers through a technique named “License Lock-In.” This is typically achieved by locking customers into annual subscription commitments that cannot be cancelled early, downgraded, or downsized. If a business does not evaluate the solution thoroughly, and consider where their business will be in 3,6, or 12 months, they could easily waste money on a solution that is not a fit or underutilized.
Some important questions to ask to avoid unnecessary license lock-in are:
- What are my early cancellation options?
- Can I reduce my license count at any time during the term?
- How long of a trial do you offer so that we can ensure this solution is the right fit for us before committing?
One of the most common types of business overspending is purchasing unnecessary add-ons. These add-ons come in many forms, but a great example is Microsoft’s Software Assurance. When purchasing a Microsoft license for your server, for example, there is a one-time only cost for the license itself. There is also the option to add-on Software Assurance, which is typically an annually recurring license cost.
Software Assurance allows you to upgrade the version of your server software to the latest version at any time during your Software Assurance subscription. On the surface, this sounds beneficial. For many larger organizations, it can result in cost savings over time. For most small businesses, though, it’s an add-on that’s rarely utilized since they remain on the same server version for 6-7 years, especially when there is no cost or security benefit to upgrade.
Some important questions to ask to avoid purchasing unnecessary add-ons are:
- How exactly will I use this add-on?
- If I cannot or will not need to use this add-on immediately, when will I need to use it?
- If I do not purchase this add-on, what will it cost me later should the need for it arise?
Making purchase decisions for technology can be very challenging, especially when you don’t have all the facts. Being aware of common purchasing mistakes and having the right questions to ask, however, can save your business thousands in unnecessary spending and allow you to reallocate those funds to something that helps drive your business forward.
Mature managed I.T. service providers (“MSP”), such as Digital Boardwalk, can be a valuable resource to you when making purchasing decisions. They can perform this due diligence for you, take into consideration both your short term and long-term technology roadmap, and discuss your business objectives to verify the purchase aligns with your goals. After all, the more money your MSP can save you in unnecessary spending, the more money you will have to grow your business, which inevitably helps your MSP grow over time.