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So What’s the Real Cost of Technology?

Marc Osten
March 21, 2001
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A small nonprofit decides to develop a Web site. Ten thousand dollars later, with the site up and running, the organization realizes that it has neglected to allot funding for Web editing software, high-speed Internet access, and staff time and training to update the site.

Unfortunately this organization has not fully considered all of the critical elements of operating the Web site. This scenario reflects a common challenge when planning and budgeting for technology of any kind—including the many different components (see list below) of owning and operating technology. How do you determine the total cost of ownership (TCO)? Think of the components as a whole unit and plan to move on all TCO areas rather than concentrating on one. Smaller steps taken in all the TCO areas simultaneously will have a more sustained and positive impact on your organization’s technology culture than major advances in one. Moving in one area assertively, like buying lots of new hardware or instituting a major training initiative, may generate a burst of enthusiasm but cause problems if other areas are out of sync.

The Components of Owning and Operating Technology

Strategic Planning for Technology—Technology integration is complex and requires investments to plan for alignment of technology initiatives with mission. Start by getting stakeholders involved in assessing your current technology status and then strategize on what steps to take. You might need to hire a facilitator to assist you, and count on spending time discussing your assessment results and plotting an action plan for future technology actions. In the above scenario, if the nonprofit spent time planning strategically for its Web site development it would have been better prepared for the full range of management challenges that go along with launching a Web site.

Training—Budget time for staff training, but make sure that training is task-specific and has immediate on-the-job application. Short, 15 to 30-minute mini-lessons are more valuable than hours of software training. Also, consider identifying staff members who are interested in being mentors for other personnel, perhaps even paying them a stipend for their services. Our scenario would read much differently if at least one staff member had been trained in editing Web pages.

Hardware Technical Support—Assume that machines you buy will work, but budget for network and PC support in case they don’t. Don’t be surprised if you have to spend close to $300-$500 per year per PC on the network. You can secure a contract with a PC repair service or vendor that charges by the hour or a flat annual fee. For example, some national vendors such as Dell and Gateway offer extended service packages on new hardware purchases. Either way, hardware technical support should appear as a line item in your technology budget.

Software—If you have lots of different software running on different computers, incompatibility will cost you time and money in constant upgrades. If you have standardized software running throughout the organization your upgrades will be easier to facilitate and save you time. You will still have to spend money occasionally to upgrade and to have a technical expert customize and test the software. Uniformity will generally lead to quicker and cheaper problem solving. When you buy new computers, if they come with preinstalled software, make sure to choose older versions that are compatible with your existing computers. Returning to our example, having the correct editing software would reduce the time and effort of updating Web site content.

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Replacement—Computers don’t last forever. Count on replacing them every three or four years. Prices these days range from $700 to $1,000 for a network ready PC. Getting on a hardware cycling schedule will also help reduce hardware technical support costs since your PCs will never be more than four years old.

Connectivity—You can realize the power of computing when your PCs are networked in-house or through the Internet. The number of connections and the speed are two key things to consider here. When you do any wiring or purchase any network hardware, think ahead and assume that you’ll have more people on the network in the future. The upfront expense of using high-speed networking (100 million bits per second—mbps) and Internet (DSL or cable) connections will always save you money in the end. Again, in terms of the investment of staff time and effort, the nonprofit in our scenario would benefit from a faster Internet connection when uploading documents to their Web site.

In sum, the best way to avoid mistakes in technology implementation is to consider the total cost of ownership and plan accordingly. In addition, it is important to assess the value that technology can have for your internal operations and programs. Combining the financial and human resources necessary in each of the categories listed above will give you a sense of the TCO in a particular technology tool or strategy.

Use the TCO chart at right to stimulate discussion and initiate better technology planning. Consider running a staff focus group for staff input assessing your organization’s position along the TCO spectrum. (See our article on mission-based technology planning in the Fall 2000 edition of the Nonprofit Quarterly for more information and steps to take.)

About the Author

Marc Osten is an Internet strategist and strategic technology planner. His passion is development of learning systems and collaborations among foundations, management support organizations and nonprofit networks to forward social change.

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