Some 25 cognitive biases – or irrational thought patterns impact the behaviour of human beings, including business owners and executives. Arguably the most expensive of these cognitive biases is the sunk cost fallacy. When it comes to information technology, computer networks and data management, the sunk-cost fallacy is alive and well – costing Australian businesses millions.
In economics and business decision-making, a sunk cost involves a cost that has already been incurred and cannot be recovered. In other words, it is a cost from the past that is no longer relevant to decisions about the future. The sunk cost fallacy occurs when a business or an individual continues to invest simply because of this sunk cost. It is akin to spending good money after bad and is illustrated by:
- Staying with a bank that charges too much because of all the effort put into developing a relationship over many years, or it is too hard to change.
- Retaining staff who are not performing because you have invested so much in their training and development over several years.
- Staying with a Managed IT consultant that is not accepting the responsibility for your technology because they know your business or is too hard to change.
Studies in behavioural economics have consistently demonstrated that the sunk cost fallacy increases costs, reduces performance, and reduces job satisfaction. It takes strength to bite the bullet and change, but research shows it is smart. To avoid falling for and paying the significant costs associated with the sunk cost fallacy with technology, it is important to:
- Employ the latest version of all hardware. It will reduce the threats of system failure and security breaches while enabling greater automation.
- Employ the latest version of all software. It will reduce the threats of system failure and security breaches while enabling greater automation.
- Employ the latest systems architecture. It will help eliminate systems failures and increase efficiency.
- Embrace digital transformation now. It has the potential to increase efficiency and reduce the cost of doing business significantly.
- Employ staff with the skills required, invest in training – even if that means redundancies. It will save money in the medium term.
Saving money in these areas is very often a false economy. If you have the right Managed IT consultant, the costs should be manageable – delivering a high return on investment. Is your Managed IT consultant doing the right things?
- Your managed IT consultant should be able to demonstrate – not just claim – the buying power to ensure you can afford the technology you need.
- Your managed IT consultant should work with you to develop a long-term strategy to stages technology purchases and minimise the impact on cash flow.
- Your Managed IT consultant should undertake an annual audit of your system to identify issues and opportunities.
- Your Managed IT consultant should provide monthly reports with a SER1 rating to facilitate equipment efficiency management.
- Your Managed IT consultant should offer a response time that is closer to 30 minutes than 3 hours. This will reduce downtime costs.
Above all else – if you have a less than optimal Managed IT consultant – make the change immediately. The sooner you change – the more you will save and the less you will worry. Changing Managed IT consultant is straightforward. It can take just 60 minutes. All you need to do is:
- Take 5 minutes to call Wolfe Systems.
- Take 25 minutes to participate in the audit completed by Wolfe Systems.
- Take 25 minutes to review the proposal provided by Wolfe Systems.
- Take 5 minutes to send Wolfe Systems a confirming email.
We will take care of the rest, including the closure with any existing arrangements or relationships in place.
If you want to know more, please call or email us.
Wolfe Systems IT
1300 381 727