When Cheap Is Expensive

Computerworld - My dad used to say, "Cheap can be expensive." He wasn't a wealthy man, but he believed in buying quality goods because, over time, they often proved to be more economical than low-cost substitutes. To put it another way: When you go for short-term savings, you often increase long-term costs. Sometimes we buy lower-cost goods because of
a shortage of cash. If you have only $10,000 to spend on a car, you aren't going to get the Mercedes. However, short-term investment decisions aren't just a result of a lack of cash. Managers make short-term investment decisions for many reasons. Sometimes they're trying to meet short-term objectives, such as improving their quarterly profits, which seems to be a more urgent goal than investing for the long term. Besides, two years from now, they may be long gone and the health of the firm will be somebody else's problem.
Shortsighted IT decisions are a particularly big problem because the consequences are inherently long term. For example, a company may buy "cheaper" PCs to save money in the short term. However, since those PCs have a life cycle of about three years, the company will be forced to live with the consequences of its decision for that long. The consequences of short-term thinking are even more dramatic when we consider that many applications have a life cycle of 10 years or more.
There are two areas in particular where short-term thinking regarding IT is going to sting many organizations in the coming years:
? Underinvesting in IT. Companies have been squeezing IT budgets for a few years, and in many cases, that was a necessity. While IT budget cuts may be needed, companies have to maintain some balance between cost reduction and long-term investment. Many of the IT managers I talked to during the past year were asked to make extraordinary cuts in their IT budgets. These reductions were so deep that they now need significant upgrades to their IT infrastructures and have a backlog of application development needs that they won't be able to address in the foreseeable future.
For example, many companies are still running core systems on old technology that really should be replaced. However, because of the lack of ongoing investment in IT infrastructure, many companies are finding that the infrastructure upgrades required to launch new enterprise initiatives make the efforts cost-prohibitive.
• Offshore outsourcing. It probably cuts costs in the short term, but not necessarily in the long term. Sending IT work offshore can be economical, but too