How to Save Money on Small Business Technology

Monday Feb 22nd 2010 by Gerry Blackwell
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Should you upgrade your IT infrastructure, or should you make do for awhile longer? Even the experts are conflicted. Either way, we have tips that can save you money on your small business solutions.

Market research firms predict that small businesses in the U.S. will start buying computers, peripherals and network gear again this year. While this might be good news for small business technology vendors, there are others who believe there are valid reasons to hold off on IT hardware spending.

Small businesses are still gun shy, and rightly so, says Robert Garmaise, senior vice president of research and strategy at Info-Tech Research Group Inc., a firm that provides IT research and consulting services to small-medium businesses.

“I think it’s very slow, if there’s recovery at all,” Garmaise says. “I’d certainly say that six months ago we were still in free-fall. Companies were cutting back pretty aggressively. Now, they’re trying to keep costs flat or show only marginal increases.”

And that’s probably what they should be doing, he adds. Garmaise has some great ideas about how to achieve this. More on that a bit later.

The industry, of course, has different ideas. It is “cautiously optimistic” about the turn-around, according to Brian Burch, director of marketing for small business at HP.

Burch believes many small business have clung on to dated equipment for a long time, partly because of the recession. “I think this will be the year of the refresh, and that we’ll see a lot of intelligent buying by SMBs this year,” he says.

Small businesses have much to gain — and money to save — by investing in computer upgrades now, Burch contends. New PCs based on the latest processors from Intel and Microsoft’s new operating system Windows 7 can deliver a three-times increase in productivity, he says — while reducing electricity consumption by 50 percent.

Furthermore, HP is offering financing options through its commercial resellers that give small businesses one year of financing at zero percent interest for purchases over $1,500. And it offers a trade-in allowance on used laptops and desktops — on average $100 for laptops.

HP hopes that these combined factors will persuade small business  owners that this is the right time to refresh their laptops and desktops.

Maintain IT Infrastructure Status Quo

Garmaise’s firm, however, is still focused on helping companies find ways to not spend money on IT, and one perfectly viable way of doing it is to not refresh.

A lot of smaller companies are taking a “run-it-into-the-ground type of approach” to managing their desktop and laptop computing infrastructure, he says. And within reason, there is nothing wrong with hanging on to computers for a year or two longer than in the past.

You don’t want to push it too far,” Garmaise says. “But we’re not hearing a lot of horror stories from companies that are doing it.”

Some companies, especially those with IT departments, have a tendency to upgrade computers more quickly than necessary without really justifying the cost decision, says Garmaise. “IT tends to fall in love with infrastructure.”

Burch, on the other hand, points out that small businesses may incur higher maintenance and repair costs, as well as frustrating constraints on productivity and connectivity, because they continue to use gear that's past its best-used-by date.

To stay alive and competitive, small businesses need to strike a balance and think more carefully about when to upgrade equipment — and in general, how they spend their IT dollars.

Instead of asking "Should I keep up with the latest technology," Garmaise suggests that the better question to ask is "What do I need to meet this year’s goals or my long-term objectives?”

Rather than spending on a previously scheduled equipment refresh, many small businesses, according to Garmaise, are taking “more of the capital spend, if there is any, and applying it to business application projects that show a specific ROI — a revenue kicker or a cost reduction.”

How to Cut Small Business Computer Costs

If a small business absolutely must upgrade its hardware, Garmaise recommends the following options to keep costs in check.

Don’t buy extended warranties
Warranty extensions can add about $100 per PC, he points out, yet PCs rarely break and don’t cost that much to replace if they do – usually less than $800. One caveat: very small businesses with no IT skills in house might want to think carefully about this step.

Negotiate with resellers
Many small businesses buy through commercial resellers that also provide other services such as installation and software integration. These resellers may not always offer the best prices on hardware. If a small business wants to continue buying from a reseller with which they have a good relationship, they should check to make sure pricing is close to what they would pay at a retail outlet, and if not, bargain for a better price.

Join a buying group
A buying group negotiates volume discounts on behalf of all members. Not many small businesses are doing this, Garmaise concedes, but it’s worth exploring. One commercial example is Maxopia Inc.

Consider netbooks
Many small businesses are also finding they can replace out-dated laptops with netbooks which are generally cheaper than full-size laptops and provide adequate power and functionality for many users – and more mobility, Garmaise points out.

Save on Software Support

In addition to tips on cutting hardware costs, Garvaise's firm, Info-Tech Research Group, offers other ideas about how small businesses can reduce IT spending.

One easy way to save is to avoid software maintenance, support and licensing contracts such as Microsoft’s Enterprise Agreement (EA), which provides a bundled price for regular software upgrades and support. Mom-and-pop shops may not have EA licensing but businesses not much bigger do. And Garmaise says they don’t need it.

“It makes you spend more than you would if you got only the [upgrades] you really need," he says. "It only makes sense if you’re upgrading everything all the time, and most small companies aren’t doing that.” Furthermore, he adds, paid-up-front support contracts for products such as Microsoft Office don’t make sense because little goes wrong with such programs.

Another culprit for unnecessary support and maintenance spending is Cisco’s SmartNet program for support on local area network gear. “To Ciscso’s credit,” Garmaise points out, “the equipment is very reliable and [buying SmartNet] can add 15 percent to 20 percent [of the original cost of the equipment] a year.”

Save Money with Open Source and the Cloud

If small businesses are in the market for new software applications, they could consider much less expensive open source options that are developed, regularly upgraded and, to some extent, supported by volunteer programmers.

Companies large enough to need a help desk, for example, could consider some of the open source help desk products, Garmaise says. They may want to pay a commercial supplier for implementation, maintenance and support if they don’t have software geeks on staff, but the initial license is free.

Other possibilities include OpenOffice.org’s OpenOffice PC productivity suite, which provides a good chunk of the functionality of Microsoft Office, includes some MS Office compatibility and is free to download.

And of course many small businesses are turning to cloud computing options such as Google Apps, an affordable set of productivity and communications applications that costs $50 per user per year for businesses — or free for personal use.

Online backup and storage services such as MozyPro for business are also a bargain. And if your business is very small or you have minimal storage needs, Mozy's home version offers free data backup for up to 2 GB of storage.

Cloud computing has become very popular, largely because of the reduced capital costs involved, but some analysts say that software products offered online over the Internet can be more expensive in the medium- and long-term than traditional in-house software applications.

And some people still worry about data privacy and security with services that store a company’s data at a remote server.

HP’s Burch suggests some other strategies for reducing IT costs long-term, but they require an initial capital outlay. One is server virtualization — using software that allows a company to reduce the number of servers it needs by running multiple applications on one box. For mid-tier SMBs, this can save IT management and maintenance costs and hardware costs in the long term.

Related to server virtualization is the idea of adopting a thin client approach in which all software runs on networked server computers, and employees use thin client computers that are cheaper and easier to maintain because they need less processing power, memory and local storage.

Most small businesses, Garmaise advises, would be wiser to remain cautious in their IT spending for the next year or so and continue to look for ways to pare costs.

Gerry Blackwell is a freelance technology writer based in London, Canada. Read his blog, AfterByte

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