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Should I invest in IT When the Economy is Down?

June 30, 2011 - 0 Comments

Guest Post by Contributing Author Ken Presti

There are times when budgets are relatively flush, and the decision to invest in the business comes relatively easily. Then there are times like we’ve seen recently. “Do we really need to buy this box of paper clips? Hmm. Better call a meeting.”

And with plenty of speculation about the direction of economic things to come, IT purchase decisions are being made as carefully as ever. To a certain extent, pent-up demand has loosened the flood gates. But sales and refresh cycles are still a bit long in certain circles, and the emphasis is constantly upon how the recommended investments will either pump up the revenues or trim back the expenses. That’s not a bad thing. That’s just good business in the post-bubble world.

But when a solid business argument can be made, the necessary resources to make the upgrade happen can often be found. And even in circumstances when they are not immediately available, the deal can still survive.

Many channel partners who sell to small businesses these days are also bringing finance packages to the table, and often times the interest rates are quite reasonable. In many cases, these finance contracts are underwritten by the same technology vendors whose products are being sold to the customer. Thus, they are even more highly motivated to help put the terms within reach of the customer. Many small businesses also have alternative arrangements, such as credit lines from their banks, that can also be used to put the upgrade within reach.

Depending on the nature of the technology upgrade, sometimes the project can even be extended over multiple quarters. For example, if the proposed solution includes a substantial infrastructure refresh in order to support the overall solution, some companies have managed to get the most for their money by starting first with the underlying infrastructure swap out, and then proceeding with the rest of the upgrade in subsequent quarters. That means the actual investment can be spread out over time, as opposed to doing the whole enchilada in a single budget cycle. This tactic is sometimes possible, although it’s worth noting that this is usually easier to execute at larger companies that have lots of seats and extensive networks.

Aside from all this, a decision can be made to not do the upgrade. This can be made either decisively, or non-decisively by simply avoiding the decision. But backing away from the expenditure is not necessarily the most fiscally responsible option. Remember that channel partners have become well accustomed to devising projects that can either pump up their customers’ revenues or trim the expense line. So definitely ask your questions about time-to-payback and other matters that are important to the bottom line. But once you get beyond payback, the economics should be working in your company’s favor – at which point stepping away from the upgrade would have been the wrong move.

Due diligence, planning, and a little bit of courage often pays dividends.

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