I'm familiar with a government agency that still uses DOS as its workstation operating system. Several years ago, this organization developed information management systems that were as effective and appropriate as they could be, given the technology then available. Obviously, available technology has changed. Also, the system's user requirements have changed. The agency must now change or replace most of its information systems quickly and simultaneously. These rapid large-scale changes will require radical modifications in user procedures and a lot of user retraining.

To compound the problem, this agency's local area network hardware platform has not been upgraded for several years. The network server is worked to its disk capacity andperiodically crashes. This leaves 150 users unable to do anything during the downtime. The agency estimates that downtime costs $5,000 a minute. There is only one server on this network, so work can't be shuttled to a different server.

All the costs of network upgrading and retraining will have to be absorbed in one or two fiscal years. Service to users and to agency customers will be disrupted, and the risks of total system failure are maximized.

I've seen similar situations develop in other organizations. Several potential missteps lead into this trap. I've observed one root problem over and over: Decision-makers frequently underestimate the costs of doing nothing, of maintaining the status quo.

Textbook approach

In an ideal world, upgrade and replacement decisions are made on a rational basis: cost effectiveness. Open any managerial finance textbook and you find discussions of net present value, internal rate of return and discounted future cash flows. The textbook cost/benefit analysis consists of defining a problem, proposing solutions, developing cost and benefit estimates for each alternative,

then selecting the alternative that yields the greatest payoff or rate of return.

For these methods to work, accurate estimates of costs and benefits for each proposed alternative must be calculated. For projects involving new system development, upgrades or acquisitions, this is straightforward: obtain acquisition costs from vendors and estimate in-house development costs based on labor and so forth. These costs are relatively easy to isolate.

But what about the alternative that doesn't involve change, the status quo option? The costs of doing nothing are often overlooked, underestimated or assumed to be zero. This is because the costs of doing nothing are often hard to quantify or identify.

The Price of Nothing

Underestimated costs of doing nothing include downtime, using small-organization procedures in a big organization, lost migration paths, unsupported or peculiar software, the cost of large-increment upgrades vs. small-increment upgrades, the need for spare capacity to enable response to new problems or opportunities, and incompatible mixes of old and new software and hardware.

The most obvious status-quo cost factor is downtime. A failing system's downtime can be reported and projected. A system not currently failing may fail in the future, yet you have no downtime history on which to base projections. In either case, future downtime must be estimated, and costs of lost work time and repairs must be extended from these estimates. Downtime can be estimated by projecting disk and other resource utilization based on past experience and on forecasted growth in demand.

Moving On Up

The next cost factor involves clinging to outgrown systems. California's county government agencies have grown considerably over the last 30 years. Business transactions, numbers of employees and operational complexity have all increased. Instead of adopting new methods and technologies, some organizations stretch their old information systems to accommodate the growth they experienced. Eventually, the organization slows down, becomes less efficient or effective, and gives its customers poor service. If the organization's revenue is fee-based, that revenue will decrease. Other related costs are more qualitative: public dissatisfaction, more complaints to elected officials and pressure for privatization.