In the rapidly evolving world of technology, one might assume that larger businesses are the ones shelling out the most for IT services and infrastructure. However, the reality is often quite different. Smaller businesses, despite their limited budgets, can end up paying more for IT. Here are eight reasons why:
1. Multiple Subscriptions and Products
Small businesses frequently adopt software and services on an as-needed basis. Over time, this often results in a multitude of subscriptions and products, many of which overlap in functionality. Without a cohesive IT strategy, businesses end up paying for several tools that could be replaced by a single, more efficient solution. The cumulative cost of these subscriptions can quickly spiral out of control, draining resources that could be better allocated elsewhere and also introducing or increasing dangerous technical debt.
2. Randomly Chosen Solutions Over Time
In the rush to meet immediate needs, small businesses often choose IT solutions without thorough research or a long-term strategy in mind. These ad-hoc decisions can lead to a disjointed IT infrastructure that is both inefficient, expensive to maintain and lead to lower cybersecurity hygiene level and larger attack surface area leading to security threats like data leak or loss. As the business grows, the cost of integrating or replacing these random solutions increases, further inflating IT expenses and technical debt.
3. Enterprise Solutions Not Suited for Smaller Businesses
Many IT solutions on the market are designed with large enterprises in mind. These products come with a range of features and complexities that small businesses neither need nor use. Unfortunately, these businesses often end up purchasing these bloated enterprise solutions because they appear to be the industry standard or because the alternatives seem inadequate. As a result, they pay for capabilities that they will never utilise, leading to unnecessary expenditure.
4. Higher Cost of Skillset and In-House IT
Hiring skilled IT professionals is a challenge for any business, but it’s particularly difficult for smaller companies. The cost of employing a full-time IT specialist or team can be prohibitive, especially when considering benefits and other associated expenses. Consequently, many small businesses either overpay for external IT services or settle for underqualified staff, leading to inefficiencies, ‘log a ticket’ mindset and increased costs in the long run.
5. Long IT Project Deployments
Small businesses often lack the resources to deploy IT projects quickly. What might take a larger company a few months to implement can drag on for a small business, partly due to limited personnel and expertise but also because of proposals not tailored to small business needs. The longer a project takes to deploy, the more it costs, particularly when considering ongoing labour, lost productivity, and the opportunity cost of delayed implementation.
6. Long Contracts with Limited Flexibility
Many IT service providers lock small businesses into long-term contracts with limited flexibility. These contracts often include services and features that the business might not need as they grow or pivot. However, breaking these contracts or attempting to scale down services usually incurs significant penalties, forcing smaller businesses to continue paying for more than they require.
7. Hidden Costs in IT Services
Many IT services come with hidden costs that aren’t immediately apparent. These can include fees for customer support, software updates, data migration, or additional storage. Small businesses, often without a dedicated IT department to scrutinise these contracts, can easily fall into the trap of underestimating the total cost of ownership, only to face higher-than-expected bills later.
8. Lack of Economies of Scale
Larger businesses benefit from economies of scale, allowing them to negotiate better deals on IT services and hardware. Small businesses, on the other hand, lack the purchasing power to secure such discounts. They often pay more per user or per unit of software, simply because they can’t buy in bulk or negotiate from a position of strength. This results in smaller businesses paying a higher per-unit cost for the same services.
Conclusion
While larger enterprises can leverage their size and resources to optimise IT spending, smaller businesses often find themselves at a disadvantage. The lack of a strategic IT approach, combined with the challenges of dealing with enterprise-grade solutions, long contracts, and hidden costs, can lead to surprisingly high expenses. For small businesses, adopting a more deliberate and informed approach to IT purchasing and management is essential to avoid these pitfalls and ensure that they are not overpaying for their technology needs.
