The Fallacy Of Full Depreciation

ServerDepreciation. The idea that assets continue to have intrinsic value which decreases over time. Is there infrastructure, IT or otherwise, that you are dying to get rid of but aren’t doing so because they are in the  closet and “have not been fully written off”? Why is that so? Is it because at the back of your mind you are thinking that you haven’t gotten your money’s worth for what you spent on them?

This is precisely the sort of thinking that will ruin your business or at least slow you down, and provide unnecessary friction for your operations. How often have you conducted comparative studies in order to ascertain whether more value is derived from keeping existing infrastructure for some specified time, or whether to cut your losses and gain more top-line business with new infrastructure that will translate into a better bottom line perhaps six months down the road? Hopefully, your strategic endeavours haven’t been plagued by short-term thinking, so that such decisions are few. If that is so, you’re in a happy position for further growth.

Decisions_2What if you are in a position where you find yourself saddled with strategic decisions from the past which turned out to be not as good? How do you manage then? Those past decisions gave you your current infrastructure. While they do work, they might not be as optimal as they might have been. Well, have you taken stock of what you actually need for optimal operations currently? Have you forecasted what you would probably need in five years’ time? Once you have done that, producing an integrated model of what would be required then makes sense. The operative word here is “integrated”. For that, all members of your decision-making team must weigh in with their inputs. That’s what they’re paid for. Which makes more sense; carrying on with current infrastructure until depreciation reaches that fabled threshold for turnover, or ditch it and set up something which actually makes your business better?

Ready to make your move? Remain agile? Continue providing great value? Then take action! What is the first step for you?

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