Often in business and personal life, people make decisions that make sense in the short-term, but the long-term, the ramifications of those choices become apparent. This fact is especially true when it comes to businesses making purchasing decisions for technology.
This is why a company’s biggest mistake is to cheap out on the technology they use to run their business.
The best way to illustrate this is by comparing an ultra-cheap laptop that a business owner purchases during a Costco special versus a more robust piece of hardware that an IT department or IT vendor recommends.
Suppose this business owner has an employee who is making $75,000 a year. That employee is making approximately a little over $6000 a month, which comes to about $40 an hour.
If that employee is given the cheap laptop and uses it for their day-to-day business operations, that laptop’s performance can be problematic. Even if it’s only 30 minutes out of their 8-hour workday, this adds up to $20 a day of lost productivity. In a single week, that’s $100 of lost productivity. In a year, that adds up to $4500 of lost productivity.
Immediately, one can see how that initial decision of “saving money” by purchasing the cheaper laptop at Costco ended up costing the business more in the long run.
However, the other factor that we need to take into account is the concept of context switching.
Context switching is when someone is working on a task, and then their attention is pulled elsewhere. When an employee gets frustrated with technology and needs to troubleshoot it, it could take anywhere from 3-5 minutes after dealing with the issue to orient themselves back on the original task. This is why even 30 minutes a day, an employee struggles with their laptop can turn into 2-3 hours of lost productivity a week, in addition to the original 30 minutes.
If we take that example and multiply it for every employee who got the ultra-cheap laptop, it turns into hundreds of thousands of dollars worth of lost productivity per year.
What is the opportunity cost of cheap technology?
As discussed, the most noticeable loss in this example is the hours of lost productivity per employee when it comes to using cheap technology alternatives. The hours spent on troubleshooting, being frustrated, and context switching can easily be imagined and quantified.
However, there are two other opportunity costs that many business owners do not consider and that are not as easy to measure.
- 1. The cost of employees not being able to deliver services on-time to clients.
When employees spend more time fighting against the technology they use, they cannot deliver the best service to clients. We can compare this to having a painter paint a house, but they have the wrong paint and are using mediocre tools. Not only will the painter take longer to do the job, but the result won’t be up to the client’s standards.
The same can be said about giving employees the wrong technology. Hardware and software are the modern-day tools that employees use to deliver services. If employees do not have the right tools, then they cannot provide the best service.
This results in unhappy customers who will not continue doing business and will not give the company the referrals it needs to grow. Repeat clients and referrals are significant players when it comes to developing a company’s revenue. - 2. The cost of superstars, your best employees, leaving the company.
Employee morale is a factor that is difficult to quantify and measure. There can be many reasons why an employee decides to leave the company. Cheap hardware that brings them frustration should not be one of those factors. In several cases, when a business owner chooses to purchase “more affordable” alternatives for their technology, this can affect employee morale, especially when it comes to their best talent.
We’ve all been there. All of us have experienced the frustration first-hand when it comes to dealing with slow technology. If a rockstar employee must deal with the frustration of slow hardware daily, in addition to all their lost hours of productivity, they’ll leave the company.
Business owners work so hard to find the right employees, to train them, and nurture them, that it is difficult to measure how much money is lost when an employee leaves the company.
What is the most affordable way for businesses to get technology?
The cheapest thing a business owner can do is get the best technology that the company can afford. Do not cheap out on the technology that runs the business. As described previously, while the option of purchasing a laptop on sale may save money in the short-term, in the long-term, this decision can be more costly for the company.
Providing employees, the best technology that the company can afford reduces the number of lost hours of productivity due to hardware issues. Not only that, but this decision will give employees the right tools to do the right job. They will be able to produce the results that will increase customer satisfaction, that in the long-term, improve customer retention and referrals for the company.
So the next time your company needs to make a purchasing decision for technology, think twice before going for the seemingly ‘more affordable’ option.
