Technology Costs Should be Variable, Not Fixed

The COVID-19 pandemic has made businesses painfully aware of their fixed operating costs.  The largest fixed costs are people, often followed by office space.  Some business owners consider technology costs fixed. Outsourcing your technology immediately changes many fixed costs into variable costs that are use-based and positively impact your business efficiency.  We already prepped you for the fixed technology cost fallacy, so let’s work on why you need to outsource.

Technology needs are too varied

Internal staffing is best for positions with predictable work and skill requirements.  It is also best for positions that give your business a competitive advantage.  Technology does not meet any of these criteria.  One week, you are swamped with support calls from people transitioning to work from home, and the next week, you need high-level strategic advice on migrating from internal applications to cloud-based apps.

These swings in “demand” are well-suited for utilization-based pricing, which technology outsourcing provides.  It turns your fixed costs for staffing (and associated office space, etc.) into a variable cost based on the services needed and users supported.  Many executives object to outsourcing on other grounds, but we have covered most HERE.

Cloud-based technology costs are 100% utilization based

This has been the “cloud” selling point since it became a thing.  Pay only for what you need and no more.  This hasn’t changed and has actually gotten more true over the years.  We now pay for extra compute by the minute and burst only when needed.  Many business owners don’t like recurring monthly costs, BUT if those costs are variable and replace fixed costs, it’s a no-brainer.  We cover more on that HERE.

The move to cloud-based servers, services, and applications must be at the forefront of any business technology roadmap.  Not only does it change fixed to variable costs, but it also provides remote access and collaboration typically unavailable with on-premise servers and software.  Go through your technology budget and highlight any fixed technology costs (recurring or not) that are not based on utilization.  This is a great place to transform those fixed costs into more aligned variable ones!