Information Technology Cost Trends

Recently, it was brought to my attention that even though the cost of desktop hardware had plummeted over the past decade, industry spending on “IT Services” has actually risen.  That made me start to think about how costs across the Information Technology field were calculated, estimated, and executed.  I came to the conclusion that we may still be maturing as a field and that we should be very careful of making predictions for future revenues based upon historic trends.

Here are some costs that are shrinking.  They are all for hardware.

• Today, a business class laptop for an average user costs only $500-$800.  That is down from nearly $1500 only four years ago. 
• A desktop can be had for the exact same amount including the monitor. 
• Smartphone’s cost about half as much as two years ago.
• A small business server costs about $1500-$2000.  This is only about 80% of four years ago.

On the other hand, some costs have risen.  The following come from anecdotal evidence only, but are all for the service component.

• The average size of IT Departments seems to have risen over the past 5 years. Sometimes by 20%
• The average salary of IT pros is up.
• The number of tiers in IT departments between the CIO and entry level has increased, meaning that the upper echelons are making significantly more as a multiple of the beginners.
• The fee on service contracts seems to be up by 3-5%.

Contrary to the trend in hardware costs, service costs, the human side, of the business is becoming much more expensive.  I am not sure if this is indicative of growing reliance on IT or the realization that it is the key business competitive enabler of the Information Age.  Unfortunately, it may also just be greed and exploitation as the technology has slowing become more and more complicated combined with ever growing public acceptance of the security vulnerabilities.

As a profession, I think that we owe it to our stakeholders to decide for ourselves what the correct cost of IT as a fraction of business overhead is.  We then need to set standards within our field to hold to that standard.  If we don’t act, then the market will decide what is correct and that, unfortunately, might mean that they assume that IT costs as a service should be declining at the same rate as the hardware obviously is.

Do you think that IT costs are acceptable?  Too high? Low?  Static or Dynamic?

That is my Information Technology Thought of the Day (ITTOD) for May 5, 2009 ©Scott Coughlin

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