Budgeting for IT hardware can be very challenging nowadays.
What are the critical upgrades? Is purchasing used smart or a bad idea? And how do we go about getting the best pricing?
Yes, the list of questions goes on and so it is quite a lot to plan for, especially when the organization has 20, 50 or 150 people. Since there are many variables at play, we decided to bring in one of our vCIO experts, Kaitlyn Allen, to have her share some hardware budgeting best practices with our Integrator, Nicole Stanley.
Kaitlyn Allen : That’s a really good question. A technology partner’s role in hardware budgeting is almost the entire process of hardware budgeting.
An effective vCIO should be identifying the existing equipment in a client network, planning the hardware refresh projects for each device and accounting for new hardware needs. The burden small to medium size businesses face when it comes to planning hardware budgeting should be gone if they have a technology partner.
All a client should need to do is confirm the accuracy of the data, bring new business needs to the table, and get the budget approved internally by executive leadership once all information has been verified and they’ve gone through their processes on their end.
Kaitlyn Allen: I would say that’s planning for expenditures well in advance and making sure the projects being approved meet the current needs of the business. Preparing for any type of project is definitely the recommendation.
Kaitlyn Allen : Absolutely. The budget is a living document between myself and my clients.
For example, if there’s a need for an impromptu PC replacement that was not originally in the technology budget for the year, I would work with my client to pull the funds from their contingency budget to get the end user up and running as the number one priority.
Once the immediate need has been addressed, I would update the living budget document to reflect a new hardware refresh date for the new machine and remove any reference to the device no longer in the client environment. It’s very important to be flexible when it comes to a client’s technology budget. You don’t want a client to be unable to function because something has happened in their environment that wasn’t planned and things do happen.
The highest priorities when it comes to hardware budgeting are always dependent on the client’s business. So if data is critical to the business, contains sensitive information or has compliance requirements, the hardware housing that data is the highest priority to budget for. So that would typically include equipment for that hardware by just association.
Kaitlyn Allen : Many MSPs don’t have scheduled refresh rates for hardware such as monitors, keyboards, mice, et cetera, as they can be used for extended periods of time without failure and are very easy to replace in general.
So these items typically have low impact when they stop functioning and are inexpensive items to replace on the fly.
Kaitlyn Allen : New is always preferred over used equipment, as new hardware often comes with hardware warranty, vendor support at the time of purchase.
That allows for replacements of those devices without additional unforeseen costs down the road to go through a return process, et cetera. Purchasing new equipment will also minimize the risk associated with gray market devices.
So when clients purchase used or refurbished equipment to try to cut costs, they’re often purchasing equipment from untrusted third party resellers. It can be a huge security risk once the hardware enters the company’s production network. Licensing isn’t really safe either.
I have had clients try to purchase inexpensive licensing through an untrusted third party reseller only to discover that the product keys are invalid, for example, or they’ve already been used by another user. So at the end of the day, paying a premium upfront to have something done the right way will save a client money in the long run, especially when you consider time spent returning equipment and licensing that doesn’t work, repurchasing the correct items, workflow impacts if those items are needed by a specific date…
Kaitlyn Allen: Especially with COVID and supply chain, obviously we saw a lot of need for flexible solutions to those types of problems.
Making sure equipment is available by the time the client needs it is still up in the air at times. If a client requires something very particular to function and the hardware is on backorder for months, it becomes an immediate challenge.
Sometimes we have to downgrade or upgrade our usual hardware recommendations to meet a project timeline. This whole process requires a professional’s eyes to ensure the alternate equipment will meet the project outcomes just as the original recommendation would have. Fortunately for our clients, MSPs are full of experts in the trade that can pivot when they need to and work out a new solution based on product availability.
Kaitlyn Allen: In an ideal world, new hardware would always mean increased speed for end users to work more effectively for example.
However, when a client is being proactive in budgeting or new technology hardware, efficiency also means preventing downtime due to hardware failures, security incidents, slowness due to outdated hardware builds, et cetera. Flashier isn’t always better and I think that’s what a lot of business owners tend to associate, especially when they get into that mindset.
So it’s important to focus on projects that fill a specific need for the business rather than spending money on projects that serve very little purpose to the business, but feel like a fun, new, interesting thing to do.
Kaitlyn Allen: Old aged hardware and end of life systems are both huge risks in a technical environment.
Equipment that is five years or older typically is far more likely to experience hardware failure. So depending on the impact of each specific device to the company’s operations, downtime due to hardware failure could be anywhere from a minor annoyance to a severe hit to the company’s bottom line.
So the security risk comes into play when we are talking about outdated devices that are not patched or running end of life operating systems, bad actors find new ways into computer systems every single day. So when a device isn’t being patched or isn’t supported by the vendor anymore, even a single device can be a huge target for taking down a whole client environment. I would say most of the questions I get from clients regarding hardware surrounds the need for new hardware in the first place.
So often the people approving the budget at a company are not the people who understand why the upgrades and refreshes of technical equipment are necessary. This means the vCIO plays a huge part in educating clients on what these systems are, how they function, and what the impact is to the company if these systems are not proactively maintained.
Kaitlyn Allen: Oh yes. Capital expenditures require a much more proactive approach.
For example, completing a cost benefit analysis is often required just to justify the need for these types of projects in the first place. These projects also tend to focus on overarching company objectives rather than routine projects for repairing or replacing equipment for example.
A great example of a CapEx project would be a company moving from on premises servers to a cloud hosted environment. Typically, a need for this type of project is identified well in advance of the project itself and produces a future benefit of some kind for the company. And then operational expenditures would be more of your day-to-day expenses and require much less active engagement with a client to budget for.
MSPs are in and of themselves an OpEx line item for our technology budget as our support staff maintain the existing technical environment and ensure operations continue as normal. This budget would also include recurring expenses such as line of business applications and licensing costs, security subscriptions, backup costs, et cetera.
Is it something that you’d do as a vCIO or is it normally something the clients would do themselves?
Kaitlyn Allen: It is better to have the MSP handling the price negotiations due to the discounts and benefits that can be received from just economies of scale.
MSPs also have great vendor partnerships typically with technology resellers, which ensures the client gets a great price and product is readily available. It makes sense for the client to negotiate pricing if they maybe have a way of getting a better rate than the MSP would.
For example, local government agencies and non-profit organizations are often eligible for discounted licensing and hardware. So depending on the relationship with the MSP and the ease of procuring the materials, a client may want to take the price negotiation on themselves. Hardware vendors are your best friends really, when it comes to budgeting.
Vendor relationships are incredibly important to maintain because they could mean the difference between having a positive or negative outcome for your client project. Hardware vendors are also there to answer any questions, confirm product availability, and notify us of the best deals on hardware. So that typically means that the client gets cost effective hardware that is delivered on time and meets all the project requirements, which is always great.
Kaitlyn Allen: I always love working with clients who have never had a clear budgeting process in place before. So part of what I love is just seeing the relief on all of their faces and on the faces of the staff who no longer need to take on this burden. It’s very rewarding for me.
Budgeting for hardware feels very difficult or unnecessary when you aren’t looking at the budget through a technical lens per se. So having an expert available to address your concerns, plan and educate the rest of your company can go a long way for an organization.
The reward for the client is not necessarily having to deal with the stress or fear that something will be missed, for example. So bringing that type of value to the table as an outside partner is just priceless and it makes my whole job feel worthwhile really.
Nicole Stanley: You’ve been really fantastic, Kaitlyn.
Thank you for taking the time to sit with me here. For everybody that doesn’t know we’re here on a Sunday morning, just kind of enjoying our virtual coffee together. We’ve covered a lot in this conversation and I’m sure there are many people out there that have had some of their burning questions answered.
So again, thank you Kaitlyn. And until the next one, thank you everyone for letting us take you on this IT hardware budget journey. If the idea of a vCIO excites you and you’d like to learn more about what we do here at StepUP IT, give us a call, shoot us an email or reach out on LinkedIn. We’d love to chat.