This is the sixth excerpt from the first book in the Defen series: The Board Member's IT Brief.
One time spending requests that respond to unique opportunities may, or may not, be legitimate. Such requests are often presented as transient business or service expansion opportunities, but plans aimed at taking advantage of those, if real, are usually just IT project proposals and therefore subject to the issues discussed under that heading below.
Until relatively recently it wasn't common, but it wasn't unheard of either, for companies to take advantage of vendor or special opportunities to expand computer capacity beyond what had been planned simply because the savings looked too good to pass up. In one job, for example, I had a chance to pick up a new multi-million dollar, DEC Vax 8750 for pennies on the dollar when a competitor went bankrupt before the machine could be installed -and that would have required me to get board approval if I hadn't backed off after finding that we'd have to rewire building power to use it.
Today, however, hardware dollars (outside the mainframe world) are small and new equipment gains processing power so rapidly that you can generally get significantly more bang for fewer bucks buying new than used. There is an exception: used is still often a bargain if what you're adding is very small relative to the system it's going into - but that's usually small dollars too. For example, adding four CPUs and 64GB to an installed Sun 6900 doesn't amount, at about $16,000, to pocket change for an organization capable of using a machine that big.
Software is another matter entirely. Most software licenses don't allow re-sale, but vendors do sometimes offer apparent bargains on licensing and, of course, those costs are going up, not down.
In this century, for example there have already been three general rounds of board appeals for extra budget funds for unexpected Microsoft licensing change. First in 2000 when Licensing 6.0 seemed to present a significant cost reduction opportunity, then in mid 2003 when a rash of particularly effective Windows worms forced hundreds of thousands of database and server upgrades, and during the fall of 2005 when the 50% or so of businesses still using the Windows 2000 desktop were "incentifized" to upgrade to Windows/XP SP2 by yet another outbreak of specifically targeted viruses.
An IT gift horse is more likely to have bad teeth than not
You need to treat these on a case by case basis, but history suggests that an IT gift horse is more likely to have bad teeth than not. So far, for example, there are no credible reports of companies whose long term Windows licensing costs decreased, or whose confidence in the integrity of their Windows systems noticeably increased, as a result of these particular expenditure rounds.
Where special financing often does count, and where the decision involved may genuinely be strategic, is for purchases aimed at getting staff and/or customers rather than technology.
You might, for example, be in a position where buying all or part of a software maker gets your people credible face time with key players on a tightly held customer list, or maybe brings a few really good people into your organization. In those situations the urgency usually cited is often real and the acquisition can sometimes be very valuable -but you aren't going to judge those on technology, you're going to need to look at these as business proposals and ask the usual marketing and financial management questions - not bits and bytes, but people, dollars and business sense.
Some notes: