Debunking three sunk cost fallacies in selecting enterprise software

Debunking three sunk cost fallacies in selecting enterprise software Patrick Elliott is the VP of marketing at

Has your business ever avoided investing in key software systems simply because of perceived high costs? This inaction is an example of a sunk cost fallacy.

Both psychologists and behavioural economists have noted that humans have a stronger natural tendency to avoid losses than to pursue gains. However, a sunk cost needs to be addressed differently than a risk of future loss because the sunk cost has already been paid and should be considered independent of future decisions. Simply put, the sunk cost is something we can’t get back.

Letting sunk cost fallacies creep into executive decision-making can impact the success of your business if this way of thinking persists. To establish a discipline for identifying sunk cost fallacies in your organisation and act before these tendencies influence decision-making, it’s important to first examine these misconceptions closer.

Here are three common myths related to sunk costs that you may recognise. By understanding these fallacies and the flawed assumptions they are based on, you can make better decisions when selecting enterprise software.

Myth #1: We can’t change our system because we’ve invested so much into it

The flawed logic in this statement is at the heart of the sunk cost fallacy. Investopedia defines a sunk cost as “money already spent that you can’t recover.” By equating money that was previously invested in a current system with the upside of a potential enterprise system change, you might miss out on the opportunity to make the change and generate new revenue opportunities.

Myth #2: This is adding yet another line item expense to my business

By dwelling on the cost of enterprise software and not focusing more on the specific value it brings to your organisation, you risk losing sight of the big-picture and turning your attention away from the significant return on investment this solution can yield. If an additional expense means your business can reach the next level and achieve scalable growth, then it is deserving of a place in your budget.

Myth #3: I have to stick with my plan

This “go down with the ship” thought process is one of the most dangerous reflections featured in this list. There is no set requirement that dictates you maintain a certain strategy or stick with a certain system. Don’t let the time and resources you’ve already invested get in the way of making an enterprise system change that is right for your business.

Make decisions looking forward

If executive decision makers can avoid the pitfalls of sunk cost fallacies, they have the right mindset for future business growth. Systems like a sophisticated billing platform can help improve key processes, create efficiencies through automation, and empower revenue growth.

Interested in hearing industry leaders discuss subjects like this and sharing their use-cases? Attend the co-located IoT Tech ExpoBlockchain ExpoAI & Big Data ExpoCyber Security & Cloud Expo and 5G Expo World Series with upcoming events in Silicon Valley, London and Amsterdam and explore the future of enterprise technology.


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