Lets imagine that you've magically become the owner of a small business with just over a hundred employees. Times are tough and getting tougher: higher taxes, higher energy costs, increasing legislated entitlements, and serious inflation are all incoming - and you're already getting squeezed on all sides because your bankers and your customers are living in the same climate of financial fear you are.
The bottom line is simple: if your business is going to survive, something's going to have to give.
So what to do, what to do? Laying off people who make the money will increase unit costs while leading to decreased sales; reducing quality might work for a while, maybe buy some stuff from China, but it's a death spiral and you know it. So what's left is the overheads.
You can let the bank do payroll - they keep proposing that - and maybe layoff Sally, but somebody's still got to enter the data and there's no way the bank can give Jim, your plant foreman, the flexibility Sally gives him now in terms of managing time, advances, and special payments.
There's no fat in transportation or purchasing either, they're one man bands and you're lucky to have them. Sales might be a little fat, but only Jack's not really carrying his weight, but he's new, and his customers are new to the company - and Anne says they're not people she can switch to Jill without having them thinking about their suppliers some more.
Your IT department is two people first hired as office clerks who talk a good talk about Windows and know how to use the latest cell phones - but they pretty much don't do their original jobs anymore and instead generate a never ending stream of requests for more money for computers: new gear, upgrades, licenses, services - it just never ends - and just last week the bank didn't get its inventories log on time again - and you know they're looking pretty closely at every outstanding penny right now.
The web sales stuff the accountants sold you on hasn't panned out - but Anne says it takes weight off her people because customers get information from there she'd otherwise have to hand feed them, and it has generated a few good leads -one of which led to Jack and couple of decent volume sales- so it's early days and probably a mistake to shut down and anyway it doesn't cost much, does it?
So now you look closely at IT costs. It's kind of surprising: an almost daily nuisance that's built up a lot more than you thought. You never realized, for example, that with 26 desktops and five laptops you had nine "servers" - two of them less than six months old; or, that 19 of your 31 PCs haven't had anything changed on them for two years - three nobody can find, and the other nine have an average cost, just this year, of nearly $4,000 in new hardware, upgrades, licensing, and professional support.
Richard says the older desktops and the inventory management servers will need to be replaced pretty soon - but he's asked for the money before, and they're still working.
The accounting system runs on nine PCs and two servers - and the software on those two servers cost you $11,000 each just on installation -apparently upgrades needed to migrate from the old gear. That's coming up for renewal in another six months too.
Looking more closely, you discover two of the eight servers are being used for the materials management and procurement system, but have no charges against them this year; two more being used for your web presence are costing a few hundred dollars a month to lease in some co-hosting center, but aren't on your books at all - one is in your office supporting email and word processing, and four others are on the books but disconnected and in storage - Jane says that's because they're over two years old and useless so they're just keeping them till the depreciation runs out and they can be thrown out. Probably where the two laptops and the PC went too.
Add it all up, including the two salaries salaries plus overheads, and it looks like you could be spending over $140,000 a year on IT.
According to Richard and Jane, (and a guy you asked at your accounting firm), this is all good and reasonable - just a cost of doing business, they say; but there's a niggling doubt: a guy you know who runs a small law firm was just telling you about how he's saving a bundle by switching everything to Linux. It's free, he says - and free sounds pretty good.
Explore that a bit, and you'll see that recessions are great for open source because you can layoff off Dick and Jane, hire an IT professional to switch everything to Linux, save over $6,000 a month for the next three years, and end up with a pretty good chance that the bank will get its inventory change logs on time every week.