These questions apply for all kinds of technology decisions including hardware, software, or even social media and social networking technologies.
Business people do not want to spend money on unnecessary or unhelpful technology, yet are often ill advised when they make technology acquisitions or expenditure.
I often see businesses, both large and small, acquire unnecessary or inappropriate technology for which they will never achieve the projected return on investment. Or, even worse, the ROI is based on the capital costs alone without factoring in other costs such as staff time.
New technology is often proposed by someone you know – a friend or family member, or a business acquaintance or sales person.
Here are a few questions I always ask about new technology before acting:
1) What is it and what does it do?
With this question you can find out how much the person recommending it actually understands. If someone can’t explain what the proposed technology is and what it does in plain English be very suspicious. Seek alternative perspectives if they are unable to answer this question in a way that makes sense. I always say – “if you can’t explain it to someone’s grandmother so she can understand what it is and does then you don’t understand it properly yourself”.
2) How does it work?
Don’t be afraid to openly ask “Can you explain to me how it works?” It is similar to the previous question but digs in more on the functions that it can perform and how it does so. Uncovering assumptions – such as that the proposed technology assumes access to high speed broadband – is critical. These assumptions generally add unanticipated cost to implementation of the solution.
This question also uncovers information about potential extra costs. For instance, if an application is hosted in the cloud (a.k.a. software-as-a-service or SaaS) then you will need likely need an extremely reliable and robust internet connection.
3) How does it make or save money for me?
This is an important question. Often the person suggesting technology for your business does not correctly understand its profit model. The revenue model for your business in relation to the new technology needs to be clear, otherwise calculating the payback period is impossible.
4) How long is that payback period?
Strong and confident off-the-cuff answers to this question are invariably wrong. A sensible answer to this question will depend upon a number of variables, some of which are particular to your business, time and place. I have seen more dodgy payback assertions than I’ve had baked dinners. It’s worth digging into this question and doing a proper ROI analysis.
5) What are the indirect costs of this technology?
Often the focus is on the capital cost of the technology and little consideration is given to the total cost of ownership during the life of the asset. Indirect costs include:
External costs: hardware and software maintenance (a good rule of thumb is 20% of original capital cost annually adjusted for CPI), additional support, ongoing minor enhancement requirements
Internal costs: this is usually the cost of time for staff to look after or use the technology; sometimes the technology adds new tasks that must be considered & often these tasks require some level of technical skill; also often overlooked is the possibility that you will need to take on new staff to run the technology
6) How updateable is this technology?
This is a big question. If there are improvements in the technology will you have to buy a new model or can the existing model be upgraded? Given how fast technology innovation cycles move these days, being able to upgrade or expand the technology is key to having a decent useful life for the asset.
7) Who else uses it & how do they use it?
If nobody else is using the technology yet then there needs to be compelling answers to all of the other questions. Further, if there are no other local users (i.e. in your country) then the support infrastructure might not be there ready to offer effective support. There is nothing worse than the support help phone line being in a timezone that is opposite to your own.
The few times that I have implemented either a beta version or version 1 of a technology in business there was a bad outcome due a variety of problems. Usually this manifested itself in the form of cost and time overruns on the project. Consequently, unless there is an extremely compelling business driver, I tend to avoid betas or version 1 of anything.