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Speed of Technology: The Business Cost of Keeping Your Software Updated
To avoid getting run over by technology advances, your IT staff must consider the cost of software upgrades — and the costs of not upgrading.
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Keeping up with evolving business technology can be challenging; nearly every aspect of your IT and software ecosystem is continually updated to provide better value and service. If CIOs and IT managers fail to keep pace, they risk missing opportunities to reduce costs, boost productivity and maintain a competitive edge. To avoid being outpaced by technological advancements, your IT team must weigh the cost of software upgrades against the risks of falling behind.
We’ll explore the hidden costs of staying current with the latest technology so you can make informed decisions when the time comes. We’ll cover both employee- and consumer-facing software, with real-world examples illustrating how upgrades impact each area.
The costs of keeping employee-facing software updated
Employee-facing software includes the applications you and your staff use to run the business. These tools help staff:
- Communicate
- Manage company projects
- Keep accounts current
- Perform data analysis
Many companies use the best CRM software and enterprise resource planning (ERP) software to conduct business.
Upgrading employee-facing software is crucial. But, the average cost of an overreaching upgrade can range from a few thousand to hundreds of thousands of dollars; it all depends on your business’s size and type. However, upgrade costs go beyond software prices to include hidden and unexpected costs.
Productivity losses
Productivity losses are a significant factor during software upgrades.
- Example: Suppose you want to go live on an upgrade from your ERP software over a long weekend. You estimate implementation to take three to four weeks — without encountering any bugs. If issues arise, delays could be even longer. This means:
- Slower output for weeks
- Potential operational halts
According to ITIC data, IT downtime costs over 90 percent of midsize and large corporations $300,000 for every working hour. These costs grow even larger when litigation or penalties due to downtime are added to the mix.
Over 90 percent of companies stated that an hour’s downtime can cost them $300,000 or more. Source: ITIC Hourly Cost of Downtime Survey
Additional costs of software upgrades
Beyond lost productivity, additional visible and hidden costs of software upgrades that can impact your bottom line include:
- Operational effectiveness: Upgrades can mean changes to your normal workflows, which could cause slowdowns. At worst, they may even require some internal reorganization. How will this affect your operations, and what will the cost be?
- Training costs: Your team will need to learn how to use your new software. You’ll need to invest in employee training and account for lost productivity during this period.
- Hidden costs: Hidden expenses can include consultation fees, debugging, changes to your network, moving your data, customization, and ongoing support and maintenance.
- Communication disruptions: Dexter Nelson, founder and lead engineer and programmer at TechDex Development and Solutions, cautioned that failing to update software can lead to unexpected connectivity issues that disrupt operations. “One of the aspects of needing to update software is loss of communication,” Nelson explained. “Technology is moving faster and faster, and we’ve seen a lot of services come and go. For service providers, that usually means updated code, updated software and updated protocols. Something as simple as an updated protocol or IT address change can actually break communication and can sink data.”
Nelson recalled a case where a company unwittingly failed to update its software for a year — even though it continued sending monthly backups as usual. But, due to a missed update sent to all clients, the company in question was sending valuable data to a server it couldn’t access, making the backups useless.
The cybersecurity risks of outdated software
However, despite the costs, software updates are critical to network security. Outdated systems are likely missing the latest security patches, making them prime targets for cybercriminals eager to access your network.
“It’s not necessarily that someone will hack your server, but they could tunnel in through outdated email software you’re using,” explained Nelson. “Generally, hackers and other bad actors deliberately seek outdated software, usually to exploit old systems that haven’t been updated.”
Cybercriminals can exploit outdated software in the following ways:
- Ransomware attacks: In a ransomware attack, hackers can lock access to company data until a ransom is paid.
- Botnet hijacking: Cybercriminals may hijack outdated systems to use them as part of a bot network for large-scale malware attacks.
Software updates as a business strategy
While IT experts like Nelson work around the clock to ensure software functions properly, other business units often see upgrades from a different perspective.
“You have a collection of people with different talents, but the opportunity in employing those people is that they’ll do things to drive your business forward and make more revenue,” said Daniel Jaffe, chief financial officer at Grove Bags. “So, the goal with these software updates is to try and give your people more bandwidth to do what they do best.”
Take Salesforce, for example. Its customization options let businesses tailor the software to their specific needs. As a result, employees don’t have to waste time on unnecessary tasks. Plus, sales teams can focus on client interactions, ultimately leading to increased sales and business growth.
When all these factors are considered, you get a bigger picture of the true cost of a software upgrade.
The costs of keeping consumer-facing software updated
If your business neglects to upgrade or maintain consumer-facing software, you face the following risks:
- Lost customers due to poor user experience
- Missed revenue opportunities from outdated or slow-performing systems
- Damage to brand reputation if the software is unreliable or insecure
As a rule of thumb, businesses can expect to spend up to 20 percent of their annual software licensing fee on maintenance and updates, such as bug fixes. However, failing to properly update and maintain consumer-facing software can lead to performance issues, lost conversions and customer dissatisfaction.
Consumer-facing software examples
Examples of consumer-facing software include:
- Vendor management software: This type of software facilitates B2B transactions. It must stay updated to avoid payment failures and compatibility issues.
- E-commerce websites: E-commerce website quality directly affects online sales and customer retention; outdated software can cause shopping cart abandonment and security risks.
- Loyalty kiosks: Retailers and restaurants use loyalty kiosks to engage customers; a glitchy or slow kiosk can lead to user frustration.
- Wi-Fi management software: Many businesses use guest Wi-Fi portals to control network access, collect customer data or provide tiered service levels. Outdated Wi-Fi management software can lead to security risks, connection failures and frustrated customers.
We’ll look at two examples to show how outdated software can directly impact a business’s bottom line.
Wi-Fi management software
According to a Comcast Business survey, Wi-Fi is the top technology influencing consumer dining and lodging decisions. In another survey for Red Roof Inn, complimentary Wi-Fi was listed as more important than the hotel’s location, whether it has parking and whether breakfast is included in the price.
While free Wi-Fi was once reserved for luxury hotels, the expectation now is that all hotels will have it. For small business owners, choosing the right Wi-Fi management system is crucial. A poor choice could mean:
- Wasted investment if the service is unreliable
- Additional costs to find a replacement provider
- Negative customer reviews that hurt brand reputation
E-commerce websites
It is crucial to keep your e-commerce website updated and running smoothly. Page load speed, in particular, can be the difference between a sale and a lost customer.
Google’s PageSpeed Insights said a good page load speed means your key content — like images and headlines — should fully show up within 2.5 seconds. Any longer, and visitors are more likely to bounce before they even engage. In fact, Illustrate Digital’s 2024 Global Page Speed report found that for every extra second a site takes to load (between 0 and 5 seconds), conversion rates drop by 4.42 percent on average.
When investing in customized consumer-facing software like an e-commerce platform, choosing the right solution up front is critical. The wrong decision can lead to unexpected costs, lost revenue and customer frustration.
Tips for updating business software
When software nears its end of life, businesses have two choices: invest time and money in an upgrade or delay the inevitable as long as possible.
“Usually, I don’t let updates sit more than 30 to 60 days, because any longer is really pushing it. Anything longer than 90 days is problematic,” Nelson said. “Now, keep in mind that updates come in categories: you have minor updates, major updates and mid-tier updates.”
- Minor updates: These can typically wait 30 to 60 days, unless they cause issues. Each update is different, so a flexible approach is key.
- Mid-tier updates: These include WordPress Core updates or security patches, which usually take a week or two to implement.
- Major updates: Major updates — anything critical to operations — should be tested first, as they typically roll out within a day or two.
Even if some upgrades don’t seem urgent, ignoring them can lead to missed opportunities and unexpected security risks. Before you dive in, consider the following factors:
- Size up the costs. Carefully assess all expenses, including both upfront and hidden costs. A realistic budget helps you avoid surprises and plan for necessary investments.
- Look out for potential risks. Uncover possible roadblocks early, especially in the preplanning stage. Tackling issues before they escalate can save time, money and frustration.
- Gauge your potential return on investment. Compare different upgrade options to determine their potential value. Sometimes, looking beyond your current solution reveals better options with unexpected benefits.
- Weigh the pros and cons. List the potential gains next to the potential losses of upgrading. Having both pros and cons clearly in mind when making decisions is better than hoping everything turns out for the best.
- Plan for unforeseen problems. Things may not go as planned, so have a backup plan in place. This approach encourages you to build a safety net to handle disruption and keep your business running even if things don’t go quite the way you thought they would.
- Get a pulse on what others are doing. One way to assess whether your software is up to date is to attend events and trade shows or network with peers in the industry. By asking others what software they’re using and learning about their experiences, you can gauge whether your systems are current or if you’re falling behind.
Jaffe takes this approach to assess potential upgrade scenarios. “Lately, AI has been a big topic,” Jaffe explained. “If I talk to someone and they start talking about data insights they’re taking from AI, that can be an indicator of one of two things: Are we out of date, or are they paying extra for something they could have done internally?” In essence, listening to what others are using helps you measure your position and can guide decisions about where to invest next.
Mark Fairlie contributed to this article.
