IT Outsourced  

IT - cost of ownership

One of the most surprising aspects of my industry that continues to confound me is what companies will spend on IT. Other areas of business have generally accepted some standards for calculating projected costs, IT has evaded this analysis and unfortunately many organizations have allowed spending to get widely out of control. Public sector organizations often have the worst problem with IT budgets that are swollen. There are some very basic calculations that I use as a benchmark for determining what an organization is spending, and what it should be spending. There are two distinct areas that I have identified and two categories within each. Workstations and Servers are the cost centres, and categories for each are operating and capital costs.


While the number of staff will affect overall costs to a small degree, generally it is the cost of workstations that I concern myself with. Ideally, each workstation costs about $15-20 per month to maintain and about the same to purchase. I generally plan on about a four year life for workstations. Extending the life will increase costs because maintenance goes up. Replacing frequently will also increase the cost for both capital outlay and maintenance costs. Modern, advanced organizations with cutting edge technology do not spend less on maintenance, they spend more. Buying cheaper computers from box stores might save money on capital costs, but will drive up operating costs. There are many factors that will increase costs, such as an engineering firm which will require higher end computers and expensive software that an accounting office does not require.


Servers are central computers that can be setup to do a wide variety of tasks, including centralized e-mail stores, backups, accounting and industry specific software. In my industry the generally accepted principle is that when you hit about six workstations, it’s time to look at getting a server. Surprisingly, server costs effectively double the cost of a network - $15-20 per month per workstation for maintenance and about the same to purchase. For example, a 10-workstation network server runs about $150-200 per month to operate and $150-200 per month to purchase (plus workstation costs). I like to see servers replaced about every four years, but I would say five years is the average life. For smaller organizations, the calculation is difficult because good, stable servers are priced at certain points. A five-workstation office will likely have the same server as a ten-workstation office, so capital costs will be comparable. The larger the organization becomes and the more servers, the more reliable the price is, and you can actually start to see some savings due to efficiency.

These costs are for discussion and comparison purposes only. There are a lot of factors that will affect costs. Be aware of hidden costs. Sometimes, as organizations grow and evolve, a particular person in the office will become the IT person. It used to be common for law firms and medical offices to have one partner act as the ‘computer’ tech. These calculations are good for comparing what it would cost to outsource versus lost revenue. This is also true for small businesses where the owner spends his or her time fixing, troubleshooting and installing IT. You might be quite proud of what you spend looking after things yourself, but is it the best use of your time?

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About the Author

Mark Smed started as a self-employed consultant, integrating computers into small business in 1989.  The range of work expanded into installing networks and consulting with businesses on the fast paced changes in technology.  As his career progressed he taught Network Administration at a small business college and continued to build his base of clients. 

Today, Mark works for Northern Computer Inc. (http://www.northerncomputer.ca) as a consultant, specialist and technician.  His client base continues to grow and many of his clients have worked with him for over 10 years now.  In 2001, Mark joined the Network Professional Association (http://www.npa.org) and now sits on the board of directors and is responsible for publishing the Network Professional Journal for the association.

Mark can be reached at [email protected].

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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