Knowing When to Take the Technology Plunge

It's easy to identify the value IT brings to your business,

but it's a lot harder to write a check for thousands of dollars to purchase new systems. As a small business owner it can be difficult to determine when you should invest in expensive systems, when you should look for other solutions, or when you should stick with what you already have.

So when should you take the "IT plunge"?

New business owners sometimes start out by leasing or renting their technology because cash flow is tight and they're not sure what kind of systems they'll need as the business develops. In the startup phase, the line between business needs and business wants can be blurry, so it's probably not a bad idea to rent or lease expensive equipment until you have a handle on your critical business needs.

In fact, studies show that many U.S. companies raced to acquire the wrong kind of technologies in the 1990s and overspent by billions of dollars. In addition, they underestimated the time they would need to implement the systems. Business owners have learned a lot since the early tech boom and one of those lessons is to take a cautious and planned approach to IT spending.

If your company is more mature, your business needs have probably crystallized and this may be the time to consider a substantial IT purchase. Perhaps you've been renting equipment for years, or buying piecemeal solutions instead of making a serious investment that would push your company to the next level. Ask yourself whether or not you need to own the technology. Will the IT add value to your business and/or help you safeguard your intellectual property? Think about how you use technology: Is it something that helps your operation run smoothly or is it part of your product or service offerings? Will the technology give you an edge over your competition or substantially improve your customer service?

If technology is part of what you sell to clients, it's a business asset you'll probably want to own. Think about your technology needs over the next 12 months to three years and budget the cost of the equipment, maintenance, and support. (Long-term IT planning, over five years out, can be tricky given the speed of technology development.) Now think about your staff: Do you have the knowledge and personnel to support the new technology? Will you require outside help or consulting? Build the personnel costs into your budget to get a realistic picture of whether your business can support the new technology.

Remember that technology alone does not guarantee business success. True success will come from smart IT implementation and that depends entirely on the skills of your staff and the accuracy of your development planning.

Let's say you have the money and the staff to make an IT purchase work. The next step is figuring out exactly what technologies you need and if you have the adequate amount of time to implement them. You will need to build in time to not only install but to test the new equipment. In addition, you will probably want to run the old system in tandem with the new system until you are positive that the technology is functioning properly.

At the end of the day, taking the tech plunge is not just about money — it's about time, planning, implementation, and the advantages you expect to reap from your efforts. With enough forethought, investing in IT can be well worth the return, so let the questions above help guide you in making the decision that's best for your business.

Be sure to check out How to Develop a Technology Investment Strategy for more helpful information.

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Scarlet Pruitt is a freelance writer and business consultant based in San Francisco. She has covered business and technology for publications in the U.S., Europe, and Latin America.