Most small and mid-size enterprises (SMEs) focus IT spending on their servers, workstations, and network, and the support services necessary to keep things running. Stepping back, however, Network & Systems and User Support represent only two of the four IS service areas. Leadership & Management, which maps business goals and objectives into IS strategy and plans, and Business Applications, which implements and improves solutions to support business objectives and operations, provide the return on investment in terms of better top-line and bottom-line performance.

When most businesses analyze IT spending, they find that the vast majority goes to the Network & Systems and User Support service areas (click here to learn more about Horizon’s service model). Typically, spending on Business Applications takes the form of occasional software purchases and upgrades with little or no spending on actual Leadership & Management (Note: If your Network Administrator manages your IT department, you are spending on Network & Systems, not Leadership & Management).

While spending on networks, computers, and support is necessary, this type of spending does not generally add significant value or competitive advantage to your business. Like other areas of your business, operating costs are not investments. Too many small businesses see replacing an old server as an investment when, in fact, this should be a planned operating cost of the business. Having effective computers and support is as fundamental to operating a business as furniture, electricity, and working bathrooms.

Investments in information services, like any other investment, should provide a return: increased revenues; operating efficiencies that improve bottom- line results; or new capabilities that support or enable innovation and growth. Returns on investment in information services result from improving IS Leadership and Business Applications. While you may need to increase Network & Systems and User Support capabilities, the real investment lies in how business applications match your business objectives, operations, and growth opportunities.

To determine the right level of spending, you must first analyze your current spending. Review your current budget and prior year’s spending, classifying all IT costs into the four IS Service Areas. Within each service area separate operational costs from true investments. These operational costs become your baseline operating budget.

When considering new investments, balance the cost against the expected returns – direct or indirect – and be sure to consider soft costs and intangible results. For example, faster responses with better information may not directly result in increased revenue, but will likely contribute to customer satisfaction and loyalty. Once you have measured the costs/returns, consider relative value to the business, feasibility (risk), time frames for investments and returns, and fit with your business objectives and operations. You can then evaluate, compare, and select the technology investments with the greatest potential.

Ultimately, you will set your spending level based on a sound operating budget and investments analyzed in terms of their business (not technological) value.

Beyond a nuisance, spam is consuming more of your valuable network bandwidth and server resources.

In addition to increased diligence over your email server performance, methods exist to avoid the impact of these trends.

Interested in past issues? Click here for the archives.