Cost Creep Isn't Just a Business Problem
Years ago I worked in the Fortune 100. In my mid-20’s, like most of you, I transitioned from having jobs to having a career. My career, at the time, was all about saving a big company some even bigger bucks. At first by using a statistics-based just-in-time inventory system, and later by category expenditure reviews, product and service evaluations, and purchasing negotiations.
My job was to save a multi-billion dollar company money.
We always talked about passing those savings on to the customer, but that’s not the topic I’m on right now, so we’ll save how untrue that is for another day.
Why do big businesses hire people to do nothing but monitor and control purchasing and the associated coasts? Well, firstly it’s because somebody has to do it and the bigger your organization, the more time it takes. This justifies full time people to specialize in performing that function. There’s your clinical and boring answer.
Secondly, it’s because of cost creep. Maybe you’ve heard of this as price creep instead? They’re the same thing, except that cost creep can be a bit more broadly defined and not be solely based upon a direct price of something. You know, pesky indirect costs and all.
Every business is facing this cost creep, but so is every individual despite how much we love to claim that technology prices plummet over time due to scale.
How about an example?
You cut cable, but now subscribe to four different streaming services, don’t you? Sure, it’s still cheaper and you actually get things you want to watch instead of just drivel… but you also now subscribe to music services, book services, and even audio-book services. And you have to have the Internet to get all of this. That alone is about what a cable-only bill used to be in yesteryear.
Now that you think about it, you probably spend a lot more now than you did before, and you’re only okay with it because you’re getting a lot more perceived value. Compare: twenty mediocre music stations on cable that you can only listen to through your TV included for free, or 95% of all the music you’d ever want to listen to on your TV, phone, computer, Amazon Echo or Google Home, and anything else that can offer you an Internet connection… all for half of what a CD cost in 1999!
You spend more, but you get more. Okaaaay…
Do you really want to get more? Go ahead: take ten minutes and reflect on that question after reading this.
Are you actually the person that would buy 12 or more audio-books each year or do you do it because that’s your subscription allotment? Do you upgrade from free music streaming to ignore ads and skip songs… or just to tell yourself that you can, you know… if you wanted to?
Sure, you’ll see a lot of what you pay for, you do probably want and use. But, keep asking these tough questions and you’ll other areas where you’re paying a monthly fee for “getting more” of something otherwise never even use beyond your need to justify the expense.
Businesses want stable monthly revenues, so subscriptions are plentiful. Hell, give me 10 minutes and I’ll give you a PayPal link where you can give me as much as you’d like each month for absolutely no reason!
On top of subscription revenues to stabilize revenues, companies are fighting commoditization for products and services that should absolutely become commodities. Web hosting comes to mind for me. Artificial scarcity is the new norm for digital goods with virtually zero marginal costs. I can easily host a website for a year on less than the cost of a cup of coffee, but I don’t. Instead of $3 per year, we’re paying $20 per month. Why? In this case, my lack of desire to do any server maintenance creates a want or need, which has economic value, and that–in turn–can be used to prop up a product or service out of the commoditization phase.
Not to sound all sales-like, but that’s one reason I’m happy to have worked with Plesk in the past, and hope to do so again in the future. They provide a WebOps and hosting control panel that does most of the work I don’t want to do. One marginal subscription (even though it marginally uses artificial scarcity in its service level tier creation) covers the infrastructure tasks I don’t want to take care of myself… and the tool is configured by people who know a hell of a lot more about those tasks than I’d ever care to know!
To me, this is a great fulfillment of the promises of democratization, productization, and commoditization all intersecting and leading us to an eventual post-scarce economy.
(Note, these comments and reflections are mine and mine alone and don’t represent the interests or viewpoints of Plesk or any other businesses mentioned or implied.)
Information is knowledge. Knowledge is power. Power is money.
I think I skipped a few steps, but you get the idea.
Just as my business keeps getting annoying little pings on its credit card… a subscription service here, an unused domain name renewal there, so too do our personal accounts keep getting pummeled with nuisance charges. You pay for a family music plan, but you’re the only user; you forgot to make your HBO subscription dormant between Game of Thrones seasons; and you stupidly signed up for a random-piece-of-shit of the month club just because you liked the novelty of getting old school mail that wasn’t marked “Final Notice”. And, of course, the price has gone up by a dollar or two on all of these subscriptions over the years.
Did I mention living wages are down for about the fourth decade in a row?
Quit reading and go check up on all of your (business and personal) costs. Cut out what you can and put some money back in your piggy bank.