Technology Budgeting Basics

Today, more than ever, nonprofit organizations depend on technology. One of the challenges is to develop a budget that accurately reflects, not only the initial cost of a computer system, but all related expenses. To make certain that your computer systems remain an efficient tool for your agency, a basic understanding of the technical and economic realities is necessary.

Check Your Expectations

When it comes to computer systems and information technology ( IT), the issue for many nonprofits is one of understanding and expectations. Too often, we treat computer purchases as a one-time expense. That is to say, you buy it, and you forget about it. This is not a cost-effective measure for the purchase of a computer system. Computer systems require maintenance and support.

An appropriate analogy might be the purchase and maintenance of a car. Regular maintenance and minor repairs are necessary -- and expected -- to keep a vehicle operating smoothly. In addition to the gas needed to run the car (not to mention the yearly expenses of licensing and registration), repairs and tune-ups are needed to avoid a serious breakdown. In the long run, changing the oil every 3,000 miles will cost less than a complete engine overhaul.

Preventive Budgeting Essentials: 70/30 Rule

With the ever-increasing rate of change in technology, the state-of-the-art machine today will only be cutting-edge for a few months, and close to obsolescence in two to three years. Keeping up with technology is undeniably expensive, but there are strategies to minimize expenses and prevent surprises from decimating your budget. One should consider the Total Cost of Ownership ( TCO) when purchasing computer systems. Only 30 percent of the total cost of owning a computer system is the initial purchase of hardware, software and peripherals. Seventy percent of the ownership cost goes to technical support, repairs, training and upgrades. As systems get larger and include networks, email, Internet access and more complex databases, the yearly cost for just one computer can run close to $10,000 (when you include the salaries of technical support people and lost productivity due to breakdowns.) Therefore, if a computer system costs $3,000, be aware that maintaining the system will likely cost you at least $7,000 -- and possibly more.

Budget for Computers Every Year

Computer hardware should be classified as a yearly budgeted expense. A computer needs to be replaced at least every three years, however not all of them need to be replaced at the same time. Some will merely need maintenance. Therefore, if you annually allocate money (for instance,$1000) for each workstation, you will be able to purchase new computers for about a third of the office each year. You will also be able to maintain systems that are not being replaced.

Preventive budgeting and maintenance can help keep these costs to a reasonable level, but there are other ways to keep costs down:

• Train yourself and your staff. Knowing how to use a computer and software correctly will improve your daily productivity. In addition, if a board member asks if you can give a report combining the budget with the program database, you'll know if it's possible.
• Get a systems administrator. If your organization has more than 10 people, or is heavily dependent on a database for key operations, consider hiring a part-time systems administrator, or at least include technical support in one staff member's job description. One ratio to use is one-half to one full hour per week per employee for basic systems. Larger organizations or more complex systems (networks, e-mail servers, etc.) will require more of a person's time. Not only will that time be spent helping staff work better and troubleshooting issues, but also in keeping up to date through training, research and reading.
• Use consultants. Sometimes, even having a great IT support person isn't enough. For additional expertise outside your staff's knowledge, begin a relationship with a consultant. A consultant who is familiar with your organization's services and goals, can do a much better job providing solutions tailored to your needs and budget. You'll get better value for your money than calling in different contractors on a per-project basis. Some good resources include OpportunityNOCs.org, CompuMentor, Techsoup.org , Consultants ONTAP and The Management Center .
• Have a disaster plan. Keep a back-up copy of your most valuable data offsite. If there is an earthquake or fire and your computers are damaged, they can be easily replaced -- your data cannot. Make a backup, take it home, and get a fresh backup at least once a month to take home. If you're not backing up, you're asking for trouble -- recovering a crashed hard drive can cost $3,000 or more -- and they may not be able to save that report it took you months to complete.
• Use available resources. Take advantage of the services that help nonprofit organizations with technology. There are a variety of computer-related resources for nonprofits that most consultants should be familiar with including Compumentor's software offerings and training classes through local NPO support centers and independent training centers.

The Bottom Line

Take care of your computers. If you neglect them, they will end up costing you more money over time. A strategy that includes preventive budgeting and maintenance will help to ensure the success of your computer systems and your organization.