From chasing the latest standards, specs or software trends to keeping up with hardware inventory, technology lifecycle management can present constantly changing challenges for your business.
A lapse in technology updates can lead to cybersecurity issues and general operational problems, but establishing best practices for investing in new tech can offer solutions.
The right financing can help your organization manage its tech lifecycle and dramatically cut costs. Learn more about how to find the right financing for your tech upgrade.
Today’s leading-edge technology quickly turns into tomorrow’s old news. Organizations may feel comfortable with their initial tech purchase only to worry about losing an edge as competitors adopt new innovations.
Before a purchase, it’s important to understand the total cost of ownership of your technology, from deployment to operation. Using a cost-benefit analysis as a pre-purchase tool can help.
The cost of ownership for tech may be unexpectedly long term. Less than 20 percent of cost is the computer base price. Tech support, maintenance and labor make up 80 percent of the cost. And businesses on average spend 6.4 percent of annual revenue on IT.1
Hypothetical project: A design company with 30 employees is considering upgrading employees’ dated equipment with new computers and drawing tablets. They hope the new tech will help employees work faster, allowing the company to offer more expensive services and increase revenue.
Benefit: $250,000 per year
Conclusion: $1,000,000 / $250,000 = 4 years to break even2
Cost-benefit analysis tips3
When you’re investing in new tech for your business, timing matters just as much as cost. An aggressive update cycle can help mitigate security risks associated with older hardware and software. Hackers have long exploited old software and can find ways to target it directly.5
To maximize your investment in cutting-edge hardware, aim to invest within six months of its release — that approach can help keep it viable, says Peter Mason, head of the U.S. Bank Technology Finance Group.
A three-year refresh cycle sets your company up for the best of both worlds: manageable costs and current technology.
If you commit to a three-year upgrade cycle for desktops and laptops, consider leasing. Leasing programs offer cost certainty and consistency.6
“Once you factor in IT support costs and out-of-warranty repair bills, it’s more affordable to refresh your laptops and desktops every three years rather than wait longer,” Iacobucci says.
These costs account for server support, unplanned downtime and incompatibilities with new applications.
Annual cost per server7:
Third year: $5,200
Fifth year: $10,400
Seventh year: $17,000
For other kinds of technology, consider these benchmarks for
Laptop: 3 years
Desktop: 5 years max
Tablets: 4 years
Smartphones: 2-4 years
Some businesses have the option to enlist full-time IT team members, while others must seek external resources to support their needs. As technology changes, consider what serves your organization best.9
Spending in 2017 for data center systems was $181 billion, the spending for enterprise software was $352 billion, the spending for devices was $663 billion, the spending for IT services was $933 billion and the spending for communications services was $1,392 billion. Overall IT spending in 2017 was $3,521 billion.
Growth in 2017 for data center systems was 6.3 percent, the growth for enterprise software was 8.8 percent, the growth for devices was 5.1 percent, the growth for IT services was 4.4 percent and the growth for communications services was 1.3 percent. Overall IT growth in 2017 was 3.8 percent.
Estimated spending in 2018 for data center systems is $188 billion, the estimated spending for enterprise software is $391 billion, the estimated spending for devices is $706 billion, the estimated spending for IT Services is $1,003 billion and the estimated spending for communications services is $1,452 billion. Overall IT estimated spending in 2018 is $3,740 billion.
Estimated growth in 2018 for the data center systems is 3.7 percent, the estimated growth for enterprise software is 11.1 percent, the estimated growth for devices is 6.6 percent, the estimated growth for IT services is 7.4 percent and the estimated growth for communications services is 4.3 percent. Overall IT estimated growth in 2018 is 6.2 percent.
Projected spending in 2019 for data center systems is $190 billion, the projected spending for enterprise software is $424 billion, the projected spending for devices is $715 billion, the projected spending for IT services is $1,048 billion and the projected spending for communications services is $1,468 billion. Overall IT projected spending in 2019 is $3,846 billion.
Projected growth in 2019 for data center systems is 1.1 percent, the projected growth for enterprise software is 8.4 percent, the projected growth for devices is 1.3 percent, the projected growth for IT services is 4.6 percent and the projected growth for communications services is 1.1 percent. Overall IT projected growth in 2019 is 2.8 percent.
Source: Gartner Inc. 2018.
Technology is an essential part of running a business and makes many processes more efficient, but its prevalence can invite damaging cyberattacks. Cybersecurity serves to guard against potentially serious losses. The following statistics provide further context.
Breach prevention measures
Types of breaches
The following costs include damages as a result of leaked information, stolen credentials and sabotage to systems or software.
No matter the size of the organization, having proper financing is essential to managing the tech lifecycle.
For smaller companies, maintaining cash flow can present a major hurdle to the process; for larger ones with thousands of technologies, figuring out the optimal financing arrangement can be a time-consuming task.
By 2020, U.S. equipment and software investments are expected to reach $1.8 trillion; $1.24 trillion will be financed.
Source: "U.S. Equipment Finance Market Study: 2016-2017." Equipment Leasing & Finance Foundation. 2016.
Financing in the U.S. for software was made up of 25 percent leases, 8 percent secured loans, 15 percent lines of credit, 22 percent cash, 24 percent credit cards and 6 percent other. Financing in the U.S. for computer equipment was made up of 29 percent leases, 8 percent secured loans, 13 percent lines of credit, 19 percent cash, 27 percent credit cards, and 4 percent other.
Source: “U.S. Equipment Finance Market Study: 2016-2017.” Equipment Leasing & Finance Foundation. 2016.
LeaseUp-to-date devices with support
BuyStraightforward purchasing process
LeaseExpenditure and cash flow
LeaseLower upfront expenditures
BuyPotential long-term savings (for items that don’t fit the three-year leasing strategy)
Delaying new technology for your business may seem like an easy way to reduce cost, but that fails to account for the bigger picture of the tech lifecycle. “The cost for ownership of technology increases dramatically when an organization doesn’t take into account the full lifecycle cost,” Iacobucci explains. “Remember, there’s a point where purchasing a new PC is cheaper than continuing to operate and maintain an older one, and that extends beyond just PCs.”
Ultimately, it’s not a matter of if you need to invest in new technology, but when and how. Ignoring the technology management lifecycle could impact your return on investment and cybersecurity.
Contact U.S. Bank to learn more.