Cutting IT costs now will only cost you more in the future: Part 1

Small and medium size businesses face daunting competition from larger enterprises. 

We live in a world of ubiquitous connectivity, where technology permeates every aspect of our lives. The proliferation of smartphones and other mobile devices, normalisation of cloud computing, and growth of data and

 analytics present opportunities and challenges for businesses of all sizes. In an increasingly competitive global market, SMBs need to work particularly hard to ensure they are getting everything out of their technology dollars.

Currently, there is a lack of understanding from CEOs and directors of IT’s commercial benefits and how it can contribute to business growth. SMBs that fail to capitalise on the strategic value of IT are those that have failed to appreciate the business’ ability to create competitive advantage. This problem is further compounded by the absence of a well communicated and clearly defined IT strategy, which increases IT costs and makes it difficult to align technological resources with the strategic objectives of the organisation. The consequences of a missing IT strategy can be huge and will often result in missed opportunities to use technology to accelerate and achieve critical business performance improvements.

The tech savvy CEO

In this market, it’s no longer acceptable for business leaders to plead ignorance about technology. Just as the CEO is expected to be across the financials, he or she must be across technological matters. This doesn’t mean becoming a technology expert; business leaders depend on a financial controller to advise them on commercial strategy, and the same goes for IT strategy. If your core business is not IT, the technical details are best left to an in house specialist or external partner, but at the very least, CEOs should have an understanding of how IT can drive business performance, operational efficiencies, and improvements in customer experience and engagement.

As PwC states in a 2015 report, “As IT knowledge is specialised, it may be impracticable for directors to have this expertise. So in order to provide boards with deeper expertise to leverage when exercising their oversight responsibilities, external consultants are often enlisted as advisors.”

CEOs and directors of larger organisations are ahead of the trend in recognising the importance of IT to long term business strategy and success. PwC’s annual study of corporate directors (the results of which are outlined in the aforementioned report) found that “Directors have become more engaged with understanding how traditional and emerging IT issues impact the company’s long term strategic goals … [which] demonstrates a commitment on the part of directors to ensure an approach that aligns technology and business strategy.”

In the survey, 83% of directors stated that they were at least “moderately” engaged with understanding the status of major IT implementations. In its assessment of smaller companies, however, PwC found that directors had “less confidence that their company’s approach to IT strategy and IT risk mitigation is supported by a sufficient understanding of IT at the board level,” with 33% of directors believing their understanding “needs improvement”. If SMBs are to be competitive in an increasingly technology-driven world, they need to follow their larger counterparts’ lead. 

Partner up

CEOs need to take charge of their company’s technology agenda for growth and success, and shouldn’t be afraid to look externally first for business IT services as it’s not wise to play in a space they don’t have the expertise in. A technology partner will work to understand organisational requirements first and determine the technology that makes the most business sense. This might mean expanding on premise IT or moving to an external environment.

The starting point for any IT strategy is the availability of computing infrastructure and resources. SMBs who plan on expanding existing IT infrastructure are faced with a costly upfront investment and the use of limited capital, whereas cloud-based services are paid for via a subscription or an as needed payment model, saving capital for other key investments and activities. In addition, the ability to scale services up and down quickly enables IT to better align with real business cycles and meet fluctuations on demand.

Of course, depending on the organisation and industry, there will be some operations that are far too important not to keep on site, and it is wise to work out which resources and skills are needed to manage these systems prior to deciding on an outsourcing strategy and evaluating your IT costs. Only then can the business ensure that anything it decides to build internally and operate itself will deliver a comparable user experience, be equal or superior to the standards of an external service provider, and be delivered at a competitive cost.

Growth-driven IT

As more and more organisations compete in technology-enabled business environments, CEOs and directors must take responsibility for driving growth by leveraging technology advancements. Technology may be outside the CEO’s comfort zone, but an IT strategy needs buy in and involvement from senior management if it is to be successful. As such, it’s important for all CEOs to understand the role of technology in driving performance if they want to grow their businesses, especially in this digital era.

To help you decide if outsoucing is the right option for your business download the ebook, “Should I Outsource My IT To A Managed Service Provider.”