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When is the Best Time to Invest in New Technology?

When is the Best Time to Invest in New Technology?

Technology is important to helping us advance our business goals. As Benjamin Franklin said, “The best investment is in one’s own trade,” but with technology advancing so fast, when is the best time to invest in new technology?

From my experience, that depends on the type of technology, price, and how the technology will benefit you. Before discussing various types of technology, I’d like to introduce you to some concepts that apply to technology that some people are not familiar with, such as agile project management and the technology curve.

What is Agile Project Management?

Agile project management is used by many software producers to make it where software can go to market quicker. The software companies get software where it is usable, but not perfect. Then they do frequent updates to fix bugs and add more utility. This is based on the concept that the first 80% of the work takes 20% of the time, and the final 20% takes 80% of the time. You see this approach used by Apple, Google, and Microsoft because it works. It shows customers that they are focused on continuous improvement and creates an opportunity to soften fluctuations in cashflow by offering monthly subscriptions. This strategy is mostly used in technology companies, but can be applied in other ways, such as blogs on websites and the releases of new product lines.

What is the Technology Curve?

When new hardware comes out, it is normally expensive and has some flaws to be worked out. Let’s take desktop computers as an example. When the first desktop computer, the Program 101 was released in 1964, it cost $3,200 and had 240bytes of memory. Today we can buy a computer with 4 GB of Ram for $121.99. As you can see, the price of RAM has gone down dramatically. If all years were included, it would look like an exponential drop.

Now that you understand these terms, lets discuss when the best time to buy new technology is. I’m going to preface this with the statement that the best time to buy new technology should always be based on two questions:

  1. Do I need this for my business?
  2. Is it cost effective?

When is the best time to buy IT hardware?

Hardware gets less costly as time goes on unless there is a dramatic shift in market demand compared to supply. Buying the latest and greatest hardware will normally have less of a return on investment than purchasing the previous generation of technology. As long as it meets the requirements of your jobs, there is no reason to spend more for the newest technology if you can get more bang for your buck for purchasing the second newest technology.

In addition, hardware has now become something you can outsource through cloud computing offerings like Microsoft Azure and Amazon Web Services. These make processing large amounts of information more cost effective if you only need it temporarily. If you need help figuring out whether upgrading your systems or utilizing cloud computing is the way to go, Maryland Computer Service can help you decide and implement either solution.

One should also consider the economic impacts of purchases. Sometimes new technologies have economic incentives. For instance, solar panels commonly have government incentives to purchase and the Trump tax changes allow companies to utilize different ways of treating capital investments.

When is the best time to buy new software?

Software tends to have more frequent, but minor upgrades than hardware does, so it is less sensitive to the IT curve and often is works the other way. Early adopters sometimes receive better perks than people who adopt it late. One of the most famous examples of this is Netflix. As time has gone on, Netflix has reduced the service that people get for the same or higher price. The good news was people who were early adopters were grandfathered in for a two-year period, meaning they kept the lower price for two years while new members were paying more.

Another reason software can be adopted earlier is software as a services (SaaS) makes it where customers can try the software with a free trial period, level their cashflow expenditures, and also reduce their risk. Free trial periods are typically a month, but some offer even longer free periods. By leveling your cashflow expenditures, I mean you pay a monthly fee as opposed to a much larger one-time fee. This lets low profit margin businesses reduce their risk, while still benefitting from the same (or better because of agile project management) software. Normally, Saas also offer discounts for prepaying a year or more. You can further reduce the risk of new adoption by cancelling it without as large of a loss due to the subscription being paid based on the time you’ve had it.  These are just some of the reasons being an early adopter with software, more specifically SaaS, can be beneficial.

I hope this has helped you better understand the timing of buying new hardware and software. At Maryland Computer Service, we are happy to consult with you on purchasing decisions, installation and setup, and maintenance of your hardware and software needs to create better results with your IT spending. You can find out more information on our services page or by reaching out to us by email or phone at 301-202-6521.

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