Death by CHEAP IT
Being cheap with IT nearly crippled them.
Southwest Airlines recently had a huge fiasco during their busiest season that resulted in 16,700 cancelled flights, which left people stranded all across the United states. The chaos that ensued was the epitome of what is happening with so many businesses here in the states- a total and complete meltdown in service due to being cheap with IT.
The lack of communication led to thousands of customers being left stranded, and the debacle was even worse in places like Nashville, where the airport police were telling already checked-in travelers whose flights had been cancelled that they would be arrested if they didn’t leave. They informed these confused people that they would be physically removed if they didn’t voluntarily leave because their boarding passes were no longer valid. This escalated into Southwest employees engaging verbal fights with irate passengers. Little explanation was offered to the passengers.
What a nightmare.
This gigantic nightmare is estimated to have cost Southwest around $725 million to $825 million, not to mention the loyalty of their customers and the damage to their reputation. Now, how’s the cost of that IT upgrading looking, Mr. CEO?
Of course, nobody likes to invest money into IT upgrades and other “infrastructure” improvements. Money spent on a new website will drive new opportunities into the organization and (hopefully) gives an edge over competition. This is an ‘easy’ investment. Money spent on an office remodeling can be enjoyed every day, making employees happier and impressing clients who visit the office – another “easy” investment that delivers visible, tangible ROI instantly. But NOBODY likes to spend thousands of dollars on basic IT upgrades, they’d rather utilize cheap IT– UNTIL the meltdown brings their organization to a grinding halt at the worst possible time.
So, what should you spend on IT?
According to a study done by TechTarget, companies generating less than $50 million in revenue spend an average of 6.9% of their total revenue on IT costs. But with regulatory compliance laws and cyber-attacks on the uptick, those budgets need to be increased in order to simply avoid a massive loss. Another survey, conducted by Capterra, showed that 75% of SMBs said they would be spending 10% to 20% MORE in 2023 on software and IT than in the previous year. A HUGE increase.
What are they spending it on? Cyber security being driven by compliance regulations and risk management is, without a doubt, one of the big areas of increase in spend. Another is workforce enablement to give employees more flexible (but secure) ways to work from home, on the road or in the office. And finally, many companies are investing in any kind of technology that will reduce their need for and dependency on growing their workforce. Overhead walks on two legs – so, if a business can increase productivity without adding people, that’s always a win.
Cheap IT does not mean GOOD IT.
Being “too cheap” in anything as a means to improve profits is a terrible long-term strategy. In fact, it’s a misnomer to even call it a “strategy.” It’s simply a short-term fix that should only be used in the most dire of times. Cutting IT spend to the quick gives a false sense of savings, as Southwest Airlines discovered. It’s not a problem until it IS. Then you have a giant, expensive mess to clean up that could cost you far more in losses than in money saved short-term.
Choosing the RIGHT IT Company is one of the most important ways to ensure you’re getting fair priced and reliable service. That’s why we’ve created a FREE Report, detailing 21 Questions You Should Ask an IT Company. This will give you important information to weight when making a decision, outside of just the cost of the service. Remember, Cheap IT does not necessarily mean Good IT, but just because you’re paying a ton for IT doesn’t mean it’s good either. Find out how to tell the difference in the Free Report HERE.