The real cost of digital technology in today’s business

by Mark Hodges ([email protected]) 228 views 

The cost to avert disaster was $11.

If you lived through the ’70s, you will understand. If you hear the words “Ford Pinto,” you likely have an image of fire that comes to your mind’s eye. Toward the end of a rapid design cycle, Ford learned of a design flaw. The fuel tank, sandwiched between the rear axle and the rear bumper, had the annoying problem of the filler neck ripping away from the tank in a low-speed rear impact, and exposed bolts in the car’s body could puncture the tank. The result of a low-speed crash was prevalent: fire. The most logical fix carried a cost of $11 per vehicle.

Ford said, “No.”

Mother Jones published in their September/October 1977 issue that there were at least 500 deaths by fire over eight years.

One death was too many, and a life is certainly worth more than the $11 per vehicle fix.

Ford saved their way to tragedy, and businesses do the same daily, usually based on faulty assumptions. You have done it. I have done it. Fortunately, most of the short-sighted underfunding decisions we make do not involve loss of life. In my slice of the world, we see ongoing flawed assumptions around investment in technology.

Your spending on technology should be going up. Yes, the cost per unit of measurement may be going down, but the overall need for technology in your business will require more investment. The assumption, though, is that overall spending should be going down. That assumption is based on a fallacy — primarily because we tend to hold on to a narrative that technology costs are going down. Therefore our overall spending should be going down.

Mark Hodges

Consider a simple example: the cost of storage. The narrative is that the cost per gigabyte of storage is going down. That narrative itself is accurate: the cost per gigabyte of storage has gone from $0.12 in 2009 to $0.038 in 2017. Theoretically, the overall cost of storage should be going down, right? That is where perception starts to differ from reality. The decrease in the price (in this example) of storage has slowed dramatically in recent years. As with all cost-savings myopia, looking at this as a reason to expect an overall decreased storage cost is looking in the wrong place. Have you paid attention to the amount of data being stored?

Do you know that 90% of all data in existence today was created in the last two years? Simply looking at unit cost in this example leaves your brain expecting a decrease — when your cost of storage will likely dramatically increase.

“The cost of technology is coming down” is what your brain screams. With the increased use of technology, though, and your business becoming even more reliant upon it, your overall investment should go up. But, as Tod Bolsinger puts it, “We cling to previously held assumptions as long as possible.” Then we get frustrated because our expectation of savings is not met.

The negative result is that you put your business at risk.

In your world, you might feel that saving on technology spend is a smart move. Your choices regarding your technology decisions are simple: will you see it as an investment or an expense? Do you want your bank or hospital to use your rationale to make technology investment decisions? Have you checked how much security risk you create by your decisions? What will you do today, tomorrow or next week when you face your $11 decision?

Mark Hodges is chief growth officer of Arkansas IT services firm Edafio Technology Partners.  The opinions expressed are those of the author.