Identifying Digital Inflation
“The great growling engine of change – technology.”
– Alvin Toffler
Most nonprofits don’t have the money in their budget for a lot of excesses and extravagant purchases on an annual basis and often that results in continuously growing hurdles in IT. Stephen Wrentmore touched on this in last week’s post, but we intend to keep talking about this issue because we keep encountering the problem. Digital inflation, as Stephen called it, is an all too common phenomenon among nonprofits looking to save a few dollars in their annual budget. Each year, as expenses are trimmed, the IT budget is often among the first on the chopping block. There are a lot of dangers down that road and this post intends to highlight just a few of them.
What happens when technology is always among the first places an organization looks for cuts? The answer is simple: year over year that organization will fall further behind the curve as technology continues to change. This is the burden of digital inflation. The problem doesn’t go away; it continues to grow exponentially the longer it isn’t addressed until eventually the problem has grown to the point where an emergency action must be taken: new equipment has to be purchased and then, unfortunately, many organizations start this self destructive cycle all over again. Here’s how digital inflation happens…
Step 1: Budget Cuts
In the first year of budget cuts our hypothetical organization, “Super Cool Co.“, chooses not to upgrade any systems or modify its IT spending in the following year. A lot of things can happen in a single year in the world of information technology. While our hypothetical organization is keeping a “flat” budget, its internet service provider changes their rate structure because the delivery system they use to serve internet to their clients has gotten faster and cheaper. Our hypothetical organization misses the bus on this key IT change because it didn’t change the budget and therefore didn’t think it was necessary to perform an annual IT audit. (Assuming they do an annual audit of IT operating costs at all.) Suddenly Super Cool Co.‘s decision to keep its budget “flat” has actually resulted in the organization spending more than it should on a lesser service. This is where many people may be saying, “But where’s the harm? The budget remained flat, predictable, and they don’t know the difference!” You’re right…they don’t know the difference.
Step 2: It Worked Last Year…
In year two, Super Cool Co. is now experiencing a lull in donations and isn’t seeing the same turn out from their audience. As a result Super Cool Co. wants to cut back even further and, even though technology was first on the chopping block last year, the board and leadership are looking at IT as a place where they can afford to make a few cuts. It didn’t hurt the organization in the previous year to keep the IT budget flat, so cutting a few corners shouldn’t be too difficult… right? Sure! They don’t know the difference. So we proceed into year two with 20% less allocated to technology and now we’re starting to see the real impact of digital inflation. It turns out that the 20% budget cut could have been absorbed simply by calling the internet service provider and auditing the company’s monthly ISP costs. The friendly staff at Super Cool Co. have no idea that they could have been saving money for the past year, and now they’ve decided to cut back their IT support staff to a part-time position. The new part-time person is in the office three days a week and is only able to provide reliable support for immediate IT problems at the desktop level. No IT audit will be performed in year two because the person responsible for the audit is no longer on staff. The part-time person doesn’t have the authority or credibility with the organization’s leadership to provide insights into technology purchasing and strategic planning decisions. Suddenly we’re closing in on the end of year two with persistent problems across multiple areas of technology, no real foreseeable solutions on the horizon and, to make matters worse, the board is now rolling into budget planning for year three. With new board members coming in and old board members going out, the company now believes that the new technology budget has been “right-sized” to accommodate the organization’s actual needs.
Step 3: Trickle Down Budgeting
During year two there were a few technology emergencies: a computer died, a printer had to be replaced, and an essential piece of software was purchased by a department head out of their own budget. Digital inflation can be found not only in how quickly an organization falls out of step with the evolving digital world, it also can be seen in how your organization offsets the decision not to manage these expenses administratively. Managers and department heads with their own budget start taking it upon themselves to undertake IT expenses knowing that without these items they can’t do their jobs. It means that Super Cool Co.’s director of marketing chose not to place a few key ads to save some money in order to buy a laptop for the graphic designer. It means that the director of development chose not to hire catering for a few donor events in order to cover the cost of a new cell phone for the annual fund manager. You see where this is going, right?
Step 4: Digital Inflation
With each subsequent year, as an organization chooses to short its actual operating budget for technology expenses, those costs trickle down into individual departments. As each department head makes a decision to cut corners in their annual operating budget, that fundamentally changes the way in which they engage the public as ambassadors for the organization. It starts with smaller advertising or fewer ads across the season. They may choose to degrade the quality of service at donor events. The result is the same in either case: these decisions directly impact an organization’s reputation in the community and, even worse, among their key supporters and constituents. Suddenly everyone is aware that something is wrong with Super Cool Co. because they’re not doing the things they did three, five, or ten years ago. This scenario gets worse with every passing year.
When an organization hits the five, ten, or fifteen year mark with this type of budgeting philosophy the result is almost always the same: emergency fundraising and budget reallocation to address a crushing tide of problems that have finally reached a tipping point. These symptoms are easy to diagnose and even easier to treat.
Engaged Video helps our partners at every stage in the recovery process. We perform audits to help organizations avoid falling into the digital inflation trap. We help organizations in year three and beyond to recover from overwhelming technology hurdles by making informed decisions, developing a strategic plan for overcoming their immediate needs, and putting in place a long term plan to make an organization technologically “future-proof.” Most importantly we provide consulting services to help organizations find their voice in the digital marketplace again by teaching them how to leverage new media and better engage the community they serve. Once an organization has fallen into the budget crisis-cycle it can be difficult to reboot how managers, directors, and board members think about community engagement. Engaged Video has been down this road and we know how to help organizations through the recovery process.
Has your organization experienced digital inflation? Have you seen the effects of repeated IT budget cuts and “right-sizing” that resulted in your organization struggling to meet your engagement obligations? Tell us about your experience below in the comments section!