M is for … Marginal Cost

Marginal Cost, like Opportunity Cost, is a concept used in Economics. It’s so useful, I’m surprised it isn’t used more often, or at least more explicitly, in general. It definitely comes into its own in the world of ICT or education technology.

A simple definition is that it is the cost of producing or supplying one more unit of a product or service. To put it in even simpler terms, it’s the cost of the extra “bit” you buy/have/consume/use.

Here’s a very straightforward application of this concept. I have occasionally heard the argument that Bring Your Own Device (BYOD) is not as cost-effective as some people think, because of the cost of installing the wi-fi infrastructure necessary to sustain it.

However, this is not, strictly speaking, a valid argument, because it assumes that the school at present has either no wi-fi infrastructure at all, or that its infrastructure is so decrepit that the whole lot needs replacing. In practice, most schools have some wi-fi infrastructure, which they may need to “beef up”. However, the cost of improving the wi-fi infrastructure is unlikely to come to as much as starting from scratch.

Also, the cost of providing a wi-fi infrastructure which will support, say, 1000 devices is unlikely to cost twice as much as one that will support 500 devices.

Even if both of these assumptions are wrong in a particular instance, it is likely that even without a BYOD programme the school would wish to improve its wi-fi infrastructure anyway, as more and more tablets and other wireless devices find their way into schools. In other words, the cost of improving the infrastructure is not ascribable to BYOD alone. Or, to put this another way, the school may not be able to avoid that cost, or at least some of it, by not implementing a BYOD programme.

When estimating the cost of any ICT-related initiative, Marginal Cost, rather than the total cost, is often the most useful concept to apply.