Paying Mr. Gremlin

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Paying Mr. Gremlin

Measuring the real* cost of bad IT in business*

Why this matters to you...

You'd think nobody needs to read this article. After all, everyone knows the cost of IT —

the cost of the hardware,
the cost of software,
the cost of staff, or
contracted-out IT support,
overheads: electricity, internet access, printer paper, etc.

and, er, that's it, right?

Well not really. There are some hidden costs, rather large ones in fact, that you should know about.

This article explains some of them, and attempts to put some realistic numbers against them too. You'll have to wait for the next episode to discover ways to reduce or eliminate them altogether. For now we'll just add to your post-turkey indigestion!

To make this easier, we'll use a typical smaller business as the basis for our calculations. Our company has twenty employees, all using PCs. Unbeknownst to the owner, however, it's also subbing-out some IT to a certain "Mr. Gremlin". He's definitely not working for the company!

Working out the costs

December is the year end. In a change to his usual style, Mr. Gremlin's been emboldened by the recession and this year he's put in an itemised bill. It's a bit of a shock, but at least we can see how the money has been spent.

The bigger line items

Wasting productive time with inefficient IT:
- That hourglass icon: every member of your staff who works with computers probably spends a few minutes every hour just waiting for something to happen.
  
  For a business employing twenty people each working an eight-hour day, this amounts to a surprising 20 x 16 minutes a day. That's over five man-hours, every day, paying staff literally to do nothing!
- The World-Wide Wait More often than not, people spend around 20 minutes every working day trying to get round software glitches, unavailable websites, slow or broken Internet connections, and so on. In our mythical company that's another 6.5 man-hours worked by Mr. Gremlin every day.
Add that up: if your company is like our mythical one, then 12 man-hours every day goes to Mr. G., just on IT slowness. That's sixty hours a week, putting your "hidden employee" well into overtime.

So, paying Mr. Gremlin a reasonable average salary, you're wasting around £35,000 every year on his "services". At least he's not on double-time!
Downtime costs of broken systems:

Time wasted waiting for a system to be fixed is an obvious cost, but the other part is what economists call the "opportunity cost." It's the time wasted playing catch-up after a failure.

If, on average, our mythical business experiences only 1% downtime per month, it is still equivalent to another £5,000 per year, before you add in the opportunity cost of the problems! And who knows what might have been achieved if your staff (and customers) hadn't been held up by Mr. Gremlin's eccentric work practices?
Surf's up! Let's go play...

This is a really huge contribution to Gremlins Inc. On average, it is estimated that staff spend around one hour a day, every day, looking at social networking and recreational websites, such as YouTube, Twitter and FaceBook. Then there's on-line shopping, news, sport, and even taxing the car!

This issue is so big that Mr. Gremlin can sub-contract it out, put his feet up, and still enjoy the proceeds! In our mythical company, his "income" from this non-work alone comes to a staggering £60,000 per year.

Lifestyle note: Mr. Gremlin will of course lose his entitlement to child benefit next year, being assessed for higher-rate tax (he won't pay it, of course). This year he has easily exceeded even a cheating MP's income, and is on course for pro-footballer wages (at least in the second division).
Cost of inefficient hardware and utilization:

Wasteful topology: As IT systems have grown and developed, it's not unusual for many businesses to find themselves with multiple servers, each of which is dedicated to a specific task or application.

This would have been sensible, at the time. Each new IT system, such as an email server, customer database or web server, was a self-contained project without backwards integration. Having a separate server for each one would have been lower risk than installing onto an existing live system (unless you really knew what you were doing!).

But now the downside becomes apparent: For example, if you are running four servers for four separate tasks:
- It is likely that each server uses 750 Watts of electricity,
- that's equivalent to running a 3 KW heater continuously, and
- in summer it's more, as you'll need to cool it too!
At a cost of only 10p per kWh, that's £216 each and every month in electricity alone (£2,592 p.a.).

And four servers probably means:
- your IT provider is charging 3x more for maintenance cover!
- the overall reliability is reduced because of additional complexity
- the higher cost means funds are not available for safety features such as uninterruptible power supplies (UPS - allowing controlled shutdown in a power-cut), and failover systems (tasks are unaffected when hardware actually breaks).
Mr Gremlin loves multiple servers - they help put all the little Gremlins through private education!

Inefficient, ageing hardware: Technology really does continuously improve, and one crucial way it through energy efficiency. Modern flat LCD displays and laptops use a small fraction of the power of cathode ray tubes and desktop PCs. For example, a laptop uses (typically) 50W of power, whereas a desktop PC with monitor (even with a modern LCD) is typically 300W! So that's 40kWh more per day (at least £1,000 p.a.) that our company could save with "energy-efficient desks".

Other aspects of office IT inefficiency include old printers, especially lasers, that draw HUGE amounts of power, and "desktop" printers connected directly to computers. It may be someone's PC, but it has to be on for anyone else to print anything.

Mr. Gremlin calls such devices his "little helpers" and gets quite misty-eyed about them.

We'll cut this short—the detail of these inefficiencies is complex (we haven't even started on software licences...), but again the cumulative costs are big, and not just in energy terms. The figure included below is nominal, but shockingly realistic.

Paying the bill

Take a deep breath: here's Mr. Gremlin's annual bill to our mythical, twenty-employee company:

BILL
To reducing productivity 2010-2011:

to slow IT...	35,000*
to faults...	5,000
to staff distraction...	60,000*
to hardware ineffiencies...	10,000

Total:	£110,000
(*excludes opportunity cost)
received with glee thanks
Note: Gremlins Inc. is not registered for any sort of tax—you pay instead!

Mr. Gremlin is clearly in the right business!

That's another fine mess you've gotten us into!

Just as the true cost of poor IT is camouflaged in other expenditure, so it's not easy, either, to see how the problem originally came about. IT issues creep up on you! Often they're caused by otherwise-rational choices: haphazard (and on-the-cheap) IT purchasing, training "only when essential", or a "fix-it-only-when-it-breaks" approach.

"Saving money" this way can actually be rather expensive!

Then there's the issue of who does the support: It's useful to have staff in-house, but it's often impossible or too expensive for small support teams to keep up-to-date, and nowadays the knowledge set necessary is huge. This is especially true when addressing network and internet issues, such as web security or time lost to private "surfing". With the right knowledge this can be minimised, but it requires both the right hardware, and the know-how to set it up exactly right. That's a rarely-needed skill for a general IT person!

You may think you are saving money by buying IT ad support through the cheapest routes possible, but think again! The real cost can be huge. That doesn't mean big amounts can't be saved. You just need to find the right sort of IT business partner, with the right competency. Crucially, you need someone who understands not just IT, but what your business needs too.