There Is No Free Lunch

This article was originally written for ArrowQuick Solutions, a technology consultancy for small businesses.

Posted on September 20, 2011

If a stranger came to you and offered to give you a free car, what would you do? You’d probably be intrigued, but have some questions:

  • What kind of car? What condition is it in?
  • What do I have to do?
  • Who is this person? Is it a con?
  • What strings are attached?

These are all important questions, but the risk is pretty low to just say “Sure, I’ll take it.”

Now assume that you have to give your current car to the other person as a trade. What would you do?

This situation seems silly, but it happens every day in the technology industry. Business owners make critical choices about their tech infrastructure with little consideration of the changes or risks.

A Cautionary Story

As an example, let me tell you about a former client.

They hosted their website with us, and we would occasionally make changes on an on-demand basis. Their cost was our standard monthly hosting fee.

Then they found (or were contacted by) a company that serves their industry. This company offers some vertical integration and promised to host their website for free if they switched.

Sounds great, right? Our client gets hosting for free, plus all the industry-specific features they want.

It’s not quite the bargain upon closer inspection:

  • The new provider wouldn’t (or couldn’t) transfer the existing products from the website, so the client had to pay us to migrate the data to the new provider.
  • With this new service, the client has to pay for each product they add — which happens multiple times per month. With their old site, it cost them nothing to add products. Any new feature would have had a one-time cost for us to build it.
  • The client’s products are hosted on a separate site from the client’s website. This means they get none of the search traffic — it goes to the provider. Right now they have about 267 pages indexed by Google — once the search engine updates its index, this will fall to around 9.
  • The new provider has complete control over the client’s website and products. Any changes must go through them; it’s a closed, locked system.

Now, I don’t want to say the client made a bad decision. I don’t know the whole story. They had their reasons; for all I know, it is a perfect solution for them.

But, we see this all the time: a big company offers a low price, but there are hidden intangible trade-offs, or getting anything more than the bare necessities costs extra.

Hidden (and Not-So Hidden) Costs

Here’s some advice for any newly-minted business owners: There is no such thing as a free lunch. As Josh Kaufman explains in his book The Personal MBA:

It’s easy to understand the appeal of getting things free, but the cliche is true — “free” lunches are always paid for by someone or something else. If the piper is not paid, the source of the “free” value disappears.

Pick any two: Good, Fast, CheapThis is a basic rule or capitalism. If someone offers you a service that costs much less than competitors, they are getting the difference out of you somewhere else:

  • The product or service is of poor quality.
  • Customer support is unskilled or slow-moving.
  • There is aggressive upselling to more expensive add-ons or extended warranties.
  • They sell your info to advertisers.
  • They place their own ads within your content.

Big companies use all of these — how often have you heard someone complain about outsourced tech support, cheap Chinese parts, or a high-pressure salesman?

Moving to cheaper labor has its problems too. Freelancers tend to disappear in the middle of projects and have poor expertise. In-house employees usually have their hands full with more important stuff.

In the end, it’s all about risk. By all means, choose the cheaper solution — and make cuts to your tech budget — if you have to. (I won’t pretend the economy doesn’t stink right now.) But understand that your business will assume increased risk, and be prepared to cope with the consequences.

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