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You may have experienced this situation: Your organization buys hardware and puts it on a depreciation schedule, but for one reason or another, it must be replaced prior to the amortization schedule. Adjustments must then be made on the balance sheet, which impacts the income statement. Frustrating, right? This scenario can be avoided with the right technology lifecycle plan.

Lifecycle planning is becoming a high priority for organizations as technology costs continue to increase. The best practice at JMARK is to develop a five-year technology plan. Our goal is that the day we put hardware into operation, we know the quarter that it will be retired. This allows for the depreciation cycles of the entire environment and accounts for the necessary application/software upgrades needed to stay current. By incorporating the software upgrade cycle into the plan, we can also account for necessary infrastructure upgrades to ensure the new application versions can be supported properly.

The first step is to develop an inventory of all technology assets. This includes computers, laptops, mobile devices, switches, routers, firewalls, wireless access points, etc. Everything should be included. Additionally, the inventory should include the warranty and subscription charges for any equipment. Ideally, all infrastructure components will have an active warranty in place (original or extended) to ensure replacement parts can be acquired if needed, which minimizes downtime.

Once the full inventory is established, the next step is to identify the last replacement date for each component. This may involve help from the accounting department or researching purchasing records.

Next, we identify the major upgrade schedule of the core applications used in the business. Major infrastructure upgrades should be performed shortly before application updates, so the refreshed infrastructure includes any new application requirements.

Once we know these schedules, we compare them to the rest of the hardware replacement cycles. Generally, computers should be replaced at three years, and servers at four, while network equipment can be replaced every four or five years, depending on the circumstances. However, during a year when a major server upgrade is scheduled, an organization may choose to reduce the number of other equipment upgrades so that the cash impact is lessened. This helps level out the technology budget from year to year.

Again, all hardware should be covered under the applicable warranty and/or subscription service to ensure it stays current and replacement parts can be procured when needed. This includes workstations. Many organizations believe that it is okay to let workstations extend beyond the warranty schedules and simply plan to replace the device, should it fail. However, this creates substantial business disruption and makes the migration to the replacement much more difficult. Not to mention, there is a significant decline in performance when a computer goes beyond the fourth year.

Because we have done this for so many years, we’ve observed that the long-term spend balances out to nearly the same should an organization try to save money by extending the lifecycle. This happens because of the increase in migration costs, plus performance issues from long lifecycles. When tracked over ten years, the spend is about the same.

Technology budget management is a bit like managing a credit card. If you develop what we call “tech-debt,” eventually you have to pay the piper—and the bill always comes due at the worst time. Taking a proactive approach is much better for everyone involved.

It may take a few budget cycles to get your technology managed to the point that it levels out, especially if your organization has not managed this consistently in the past. But the long-term savings are worth it.

JMARK clients enjoy the benefit of our solution to automate the lifecycle planning process. We work through the inventory and tracking plan described above during onboarding and then create a rolling five-year plan for each client’s hardware, software, and budget. Then our client relationship managers sit down with each client quarterly to review progress, changes, and projections.

We see this planning as essential to what we call “the business of IT,” which is the work of ensuring that the technology design meets the mission of the organization and aligns those outcomes with the budget and lifecycle management plans. Managing the “business of IT” is becoming a bigger and bigger priority for all organizations as both the reliance upon technology and the cost to run it continue to increase.

If you are struggling with unpredictable technology costs and would like to find out how we can implement the right technology and lifecycle plans for your organization, let’s talk. Book an appointment at this link.

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