Managing the Hidden Costs of Information Technology

¶ … Managing the Hidden Costs of Information Technology

Information technology is an increasingly critical aspect of organizational functioning, thus most organizations can not afford to operate without it. There are many costs, direct and hidden however that result from information technology. It is critical to understand and learn how to manage those costs for organizations to succeed. Most of the direct costs associated with information technology include the obvious: acquisition of software and hardware, installation, daily operations and maintenance as well as purchase of equipment necessary for end users. There are several hidden costs however that often drive overhead expenses to the extreme. These are discussed below.

Among the hidden costs of information technology include training for IT specialists, an ongoing need facilitated by rapidly changing technology. Training itself not only costs an organization, but lost productivity time per IT worker is also very expensive (Dash, 2002). Among the training costs incurred include project management, administrative costs and time spent signing people up for classes (Dash, 2002). Most training courses generally require anywhere from five to 40 hours of management time (Dash, 2002). Training is an ongoing need in organizations utilizing information technology, and often becomes one of the biggest hidden expenditures not accounted for by management teams.

The best way to manage this type of cost is to budget for it and prepare for it according to the director of operations for the technology learning group at IT Association (Dash, 2002).

Hidden costs are also associated with a client/server arrangement including system management, overcoming LAN limitations and internetworking.

Whereas direct costs include installation and purchase of IT assets and computers as well as daily operation, other hidden costs may include: routine preventive maintenance, lost productivity and loss of "corporate momentum" when something goes awry with the system, time lost when key employees have trouble with their computers, training for in house technical employees, costs associated with space and security for the server and costs of technicians to diagnose and repair IT problems as well as the cost of staff trying to prevent future problems (MicroData, 2002).

System and server upgrades and insurance on the server-based network or upgrades to the system might be other hidden costs not accounted for when implementing an information technology system (MicroData, 2002). Many of the hidden costs associated with information technology are not tangible such as hardware or software, but need to be quantified and qualified nonetheless (MicroData, 2002).

Costs can be best minimized and managed if an organization first plans and budgets for them in order to reduce the impact on overhead. Costs can also be minimized by utilization of proper training and maintenance procedures as well as utilization of frequent updates and standardization of systems, which can contain costs tremendously (MicroData, 2002).