Decision Maker

Calculating Cost: What's Your Time Worth?

When considering a new tool for your IT team, taking only the product cost into considering is about the most short-sighted thing you can do.

I'm always frustrated -- and I'm sure you are, as well -- by the apples-to-oranges comparisons that happen all the time in IT. Let me give you an example of what I'm talking about: An administrator goes to the boss and explains what a laborious process it is to perform some particular task. The administrator suggests a third-party tool that can entirely automate the process. The boss looks at the price and says, "no."

Many times, the boss sees the administrator's suggestion as a way for the administrator to make his own life easier, and while I'm sure the boss is all for it, bosses don't spend company money just to make someone's life easier. This scenario plays out a few times, and eventually the administrator just stops asking.

The problem is that nobody -- neither the boss nor the administrator -- usually takes the time to do an apples-to-apples comparison. In other words, if the tool costs x amount, what does the alternative cost? That is, what's it costing to have the admin spending time doing the task manually?

Tracking Time
Redmond magazine's most recent salary survey ("Bigger Bucks," August 2011) suggests that IT administrators are pulling down around $85,000 a year. If you're lucky enough to get two weeks off as well as the usual federal holidays, and to only work an eight-hour day, you're working about 2,000 hours a year, making about $42 an hour. If you can prove that a given task takes you 10 hours a week, then it's costing $420 a week, or around $21,000 a year. Presuming that your time could be put to better use on other projects (which is almost always the case), and a tool could free up all of that time while costing less than $21,000, then you'd pay for the tool in a year or less.

Unfortunately, folks don't track their time all that well, and they don't often take that kind of hard-math, apples-to-apples, business-level argument to the boss. It's one of the reasons I love charge-backs so much. The upside of charge-backs is that they tell you what your time is worth, and knowing that dollar value helps you make smarter decisions when it comes to spending that money -- in other words, using that time.

I completely embrace the fact that some companies just don't have the extra money to spend, however smart a decision it might be. They'd rather spend $85,000 a year on the admin (so that the person has a job) than spend $20,000 on software (and risk not being able to meet payroll). But all things being equal, businesses tend to look at payroll as a giant bucket of overhead, and don't really try to attribute value to that expense. Software, on the other hand, is often a capital expenditure, and someone in the executive wing wants to see what the return on investment (ROI) will be.

Pinpointing Costs
Unfortunately, it's tough to point to operational tools and determine an ROI. What's the ROI of System Center Operations Manager? Well, if it keeps your Exchange Server from unexpectedly going down … priceless. What about a tool that lets you reassign NTFS permissions more quickly and accurately? Eh … hard to say, right?

No. It isn't hard to say if you know a human being has to spend three solid days of manual labor to complete the task; that tells you exactly what the cost is. Now figure out what that person's time is worth and how many times a year he has to do that task, and you'll know what the tool is worth. You'll want to know in advance what the admin's time will be spent on alternately, but there's usually a surfeit of projects sitting around IT departments.

Time, as the old saying goes, is money. Make sure you know how much yours is worth, so you can help your organization spend it more wisely.

About the Author

Don Jones is a 12-year industry veteran, author of more than 45 technology books and an in-demand speaker at industry events worldwide. His broad technological background, combined with his years of managerial-level business experience, make him a sought-after consultant by companies that want to better align their technology resources to their business direction. Jones is a contributor to TechNet Magazine and Redmond, and writes a blog at ConcentratedTech.com.

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Reader Comments:

Wed, Mar 14, 2012 John Canberra Australia

Generally I agree. Also, costs include the desk, IT resources, heating/cooling, support staff, etc. for the person, so overheads can easily get to 50-100% of salary. However we also need to look at what the person would be doing otherwise (e.g. if sitting around doing nothing then there is no loss). We also need to think about the benefits of the person doing the work manually (i.e. getting a better understanding of the subject than if they had relied on a black-box package to sort it out). Also, supposed "automation tools" can have serious learning/setup costs. There are lots of factors to consider in both directions.

Wed, Mar 7, 2012 Randy

Great point and you can easily add 15k to annual salary figure in cost to the employer including payroll tax, medical insurance, training, etc.

Tue, Mar 6, 2012 Kevin Philadelphia

Great article Don. It feels like I have this discussion every week. Providing a great, well thought through ROI analysis isn't always the answer. Getting personal my be. You're example of breaking down the costs is great. I have found though that IT spending also needs to focus on those 'keep em up at night' problems. Making Kevin at the helpdesk happier unfortunately never keeps anyone up at night . Going out of compliance with a Governance policy... that keeps people up. Some competitor, criminal, script kiddie hacking into corporate IP... keeps people up. Finding the right pain point is typically what pushes corporate spending through. Great thought provoking article!

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