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Be persistent in exposing all costs associated with proposed technology. The expenses associated with hardware and software purchases represent only a part, and sometimes the smallest part, of the total costs.

It used to be fashionable to talk about the “TCO” (total cost of ownership) and that concept had a lot of merit. But even TCO does not cover all costs as it is typically applied, because it misses collateral costs and opportunity costs.

Typical TCO would include service costs, predictable upgrade costs and the like. These are very important factors to take into account.

If you are purchasing a computer, what service is available at what cost? What is the track record others buying the same machine have experienced? Does the software you are buying provide a required upgrade path, failure to follow results in the loss of support? What is the projected cost of the upgrades or service packages? What were the costs associated with the previous three upgrades from the company?

In addition to these kinds of costs, it is important to have an understanding of the straight operating costs of the technology. It can be as simple as energy consumption. For example, perfectly good used monitors can be purchased for a few dollars. These are CRT monitors of the “television tube” sort. CRTs offer very good quality images and the capital cost of acquiring them can be extremely low. But they also consumer orders of magnitude more electricity. Is the difference in electric costs enough to warrant the expense of LCD monitors? With energy costs growing, the electricity consumed could easily exceed the value of a high end LCD.

Printers are the poster-kids of misleading costing. You can buy a new colour personal printer for as little as $60. Weeks later when you need to buy replacement ink cartridges you discover to your horror that the ink costs $200 per cartridge and to get colour you need to buy four cartridges (Red, Green, Blue and Black). Suddenly that $60 deal shows itself for a sad purchase indeed.

Ask the questions.

• What will this thing take to operate and use over the period of three to five years?
• Do I have to buy a new license for every employee I hire?
• Can I resell the license if I no longer need it?
• If my employees want to have a copy of the software on their home systems, do I have to pay again?

Again, a good consultant who is not also vending the software or hardware can be of great help simply by ensuring all the right questions are being asked. (naturally we recommend Walking Dolphins Consultancy Inc.).

Collateral costs are those costs that are incurred as a result of deploying the technology and typically come in the form of disruptions to the business.

For example, if you are moving from one accounting system to another, you will typically have to go through a process of moving your data from your old system to the new one. This process can be time and resource consuming, frequently requiring the dedicated attention of your accountant and one or more support staff. In many cases businesses employ temporary staff or even contract with the installing company to do the physical work of keying data. It would not be unusual for this cost to exceed the cost of the software.

Similarly, if your new e-mail clients are not able to directly import from the old, you may find yourself either without easy access to old e-mail or forced to go through a cumbersome transfer process.
Will installing new customer or inventory software limit your ability to make sales for a period of time?
Be aware of collateral costs by building a simple process map of the installation of major systems and ask at each point, “What effect will this have on other activities?”

Installing a particular piece of software may have unintended consequences for entirely unrelated departments or functions. As an example, your one-man shipping department has built his own spreadsheet system that depends on receiving a file in the format your sales rep has always provided. Change the sales rep software without considering your guy in shipping and things will break, at least temporarily.

So what will be the cost of re-coding new spreadsheets or providing a new solution to shipping that will be required because of the new sales software? These are the kinds of oversights that are easy to make but can add major costs.

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