Information technology is becoming ever more crucial to business process.
It’s also more powerful, complex and interactive, so it requires management, strategic planning and review. Rebecca Spicer compares internal versus external I.T. management, and examines future-proofing issues.
Technology can bring myriad improvements and cost-savings to business processes, it can even allow a business to do things it couldn’t do in the pre-digital age. Great, when it works, when it meets your needs, when it can be smoothly upgraded to allow you to do more things and meet new demands to keep your competitive edge sharp, efficient and responsive. But, unfortunately, information technology (IT) can’t manage itself. And if it’s not managed, it’s more likely to be a nightmare than a dream machine.
Most businesses have gone beyond the basics—computer, mobile phone—and now rely on IT to take care of crucial tasks, so crucial that if the system goes down the business can be paralysed. And if every part of the system hasn’t been selected according to present needs and with an eye to the future, it won’t give the business optimum scope and efficiency now, let alone later, which in the fast-moving world of IT is just a few months from now. So, to get the system you want, to keep it working and satisfying your requirements, without busting the budget and without taking up time at the wrong time, you need to ask yourself the right questions, create a strategic IT plan within your business plan and do your research to get the right answers.
It’s easy to say, but there’s plenty to consider.
IT generally involves the use of computers to produce, store and retrieve digital information, but according to Paul O’Brien, lecturer at the University of Queensland, the more commonly used term is information communications technology (ICT), which adds the growing range of communications technologies to the mix. For the
sake of this article, we’ll use the term IT. An investment in IT can potentially bring about efficiency, increased productivity and cost savings as many business processes can be automated using technology. According to a recent survey by CPA Australia, Information Technology: Its Impact on Small Business, the majority of small businesses use IT to increase their efficiency (92 percent), achieve business goals (82 percent) and reduce costs (73 percent). For example, 91 percent of businesses surveyed say they have now computerised their bookkeeping, 83 percent are managing debtors and creditors on computer, and almost half have computerised stock and customer relationship management.
Jean-Marc Annonier, SME research manager for technology analyst firm IDC, believes the hardware, or actual computer, isn’t as relevant these days when it comes to IT. "What’s really important is the applications running on this hardware," he says. "So I usually see IT as applications that allow you to manage your customers, manage your supply chain, manage all your finances—all of these applications are absolutely critical."
The main function of IT, says Annonier, is to speed up the process of running your business. As consumers increasingly demand a high level of service and fast turnaround, paper-based systems are no longer an option.
The degree to which businesses incorporate IT into their operations varies greatly and will depend on a number of variables, such as the size and type of business, its core functions, client base, available resources, and so on. The secret is to find the balance
between having enough IT to be able to run your business most efficiently and be able to do what you want with it, but not so much that it’s being wasted, simply burning a hole in your pocket until its use-by date.
O’Brien says that while there are some basic IT products small businesses will start out with, such as an accounting system and email, they may still be able to do some things manually. "But when it gets to the point where you have enough to do that it’s going to cost you a lot in labour and/or there’s a risk of human error, then you would start to automate those other functions," he says. IT can also form part of your business strategy, Annonier adds. This involves using IT to create new products and find new markets. For example, the whole business of exporting can be made easier by implementing an e-commerce solution. However, he admits this approach can lend itself more to the larger end of the SME market. Only half the respondents in CPA’s survey reported using IT to help them open up new markets.
According to IDC research, SMEs will spend on average between $15,000 and $137,000 annually on their IT, depending on their size. So with such a significant investment, it’s crucial to manage it effectively to ensure a return. O’Brien admits it can be hard to convince department managers to cough up some of their budget for IT, but he suggests managers think about how they would run their department or business if all IT was pulled out. "You’d probably end up needing to hire two or three times as many people, would have much higher costs of operations, and simply a lot of stuff just wouldn’t get done. It’s easy to fall into the trap of thinking that your IT is only the laptop or PDA, but it’s also in your printers, fax machine and phones, all the devices that run your business are based on embedded IT."
Planning your IT requires a strategic approach, not unlike marketing or human resources. O’Brien says every business should have an IT plan, which should feed directly from the overall business plan. "So, from a strategic point of view, look at key business processes and look at them from two angles: can we do this more efficiently by using technology, and can we get some strategic advantage by using technology for this thing we do better than most other people?" He then suggests business review their IT strategy regularly.
"What I’d probably do is have a three-year strategic plan for IT, but then I’d do a review of that based on what new developments have occurred in the last 12 months. So, just as you have your normal business planning meeting every year, one component of that would be how your IT strategy is going and what’s coming up that you could adapt or modify."
O’Brien’s key message to business when it comes to IT is to future-proof yourself and plan for change. "Whatever you implement, expect that within a month you’re going to need something changed." For example, purchasing a PC that’s expandable is important. He suggests business owners should be thinking, ‘I want this to still be working efficiently for me in three years, but I don’t want to buy now what I’ll need in three years’. This can be easier said than done so O’Brien suggests an IT consultant will come in handy here. Annonier agrees that small businesses won’t always have the technical capabilities in-house to be able to analyse their IT to know if they’re using it most efficiently. In particular, managers can come up against problems with integrating new software applications with existing hardware, and at the speed with which new applications are being developed, it’s an ongoing challenge. This is where IT advisers will be able to help you choose the best and most efficient IT solutions for your business.
Internal and External I.T. Management
Given that IT encompasses so many products and services, it’s sometimes more effective for businesses to outsource some or all IT needs to a third party to manage. Some choose to outsource a complete IT department to handle all computer troubleshooting, internet services, server management, security and
backups, while others prefer to maintain a certain amount of control in-house.
Essentially, the capabilities and resources businesses have internally will determine how much of their IT they’ll need to outsource. But as O’Brien stresses, businesses should always have at least one person assigned as an IT manager. Whether this is a formal role taken up by an IT professional or added to the responsibilities of the business owner or manager, it’s crucial to have someone managing the strategic IT plan in-house. "The only people who can really understand how your business works, and what its needs are, are people inside the business," he says. "So if I was going to outsource, I would still have an IT manager, but that manager’s job would be to ensure the outsource service provider is providing the services and technology that satisfy our business needs." He admits most SMEs can’t justify having a number of highly paid IT professionals employed internally. "So you tend to start with outsourcing IT but you need to keep an eye on that because eventually you’re going to get to a point where it may be more efficient for you to have some internal people who are under your control", particularly for things like maintenance of software customised specifically for your business.
Bear in mind the skills crisis is making hiring IT professionals more difficult, so if bringing in IT staff is part of your long-term business plan, O’Brien suggests bringing them in sooner rather than later. Annonier believes internalising your IT goes against the current IT trend, but what a lot of businesses are doing is using a combination of IT service providers who can better provide specialist services. He suggests not using too many, as managing the relationships can become quite a challenge, but using two key providers is a good start: "one for IT, because you can usually find a good IT company to manage all of your IT functions, and someone in telecommunications as well."
When choosing an IT service provider, O’Brien suggests: "Before they even set foot in the place get them to sign a tight confidentiality agreement and non-disclosure agreement." And before work begins, ensure a contract is signed by both parties, including a tight service level agreement with clear penalties for non-delivery. He also suggests checking the provider’s references, and some they didn’t mention, and getting involved in user groups. Given that the IT profession isn’t regulated, O’Brien warns businesses to be wary of uneducated and inexperienced IT advisers claiming to be able to deliver things they’re not capable of. To ensure their credibility, he suggests checking with the Australian Computer Society (ACS), which is a professional body for the ICT sector. Its members have to meet certain knowledge and skill requirements and must adhere to a code of ethics. The ACS website (www.acs.org.au) has a list of complying members and consultants.
When purchasing software there’s also a growing trend towards outsourcing. While out-of-the-box solutions are best for some applications (such as accounting software), software as a service (SaaS) is the outsourced option whereby the application is hosted outside your business by a third party for a monthly rental fee. Salesforce.com, for example, is a very popular SaaS customer relationship management solution. Annonier believes this model is the future of IT. "The business model is now moving more towards outsource models, and all the software vendors have at least one offering of their products based on this SaaS model." While these two options have their own their pros and cons in terms of security, cost, flexibility and usability, Meredith Thompson, managing director of Software Choice, advises putting the SaaS and out-of-the-box products side by side, "because from my perspective the way you pay for it and the way it’s delivered to your PC is secondary to whether it does the job".
Another option is using open source software—software you can access and change to suit our needs—which can be more cost-effective but also requires technical knowledge to maintain. Learning about the countless products on the market can be a challenge, so your peers, industry associations, web searches, IT sections in newspapers, and online directories are a good place to start (Software Choice— http://www.softwarechoice.com.au —has a fairly comprehensive directory worth checking out). Thompson recommends looking at as many options as possible before making a final decision, or use a consultant.
Finding the Right Software
Selecting new software for your business can be a daunting task, so Meredith Thompson of Software Choice offers the following key steps to help you make the right choice.
1. Know what you want. Prepare a detailed and objective document which shows exactly what your business needs are.
2. Search widely. Don’t just look at one or two packages, there are plenty available. Use multiple sources of information when searching for new software.
3. Shortlist. Eliminate packages that don’t make the grade by looking at your 10 key requirements, then concentrate on two or three real contenders.
4. Seeing is believing. Always look at a live demonstration of the software to make sure your key criteria are really met, using examples of your own data.
5. It’s not just the software. Check out the vendor. Are they financially stable? Do they have the right people, culture and experience to fit your business, providing the right level of support?
6. Get it in writing. Have software vendors agree to your business needs document, and any other promises, in writing.
7. Ask for help. Using consultants for key activities such as your business needs document can often make all the difference.
