Technology is impacting business owners at jet speed with accelerating volatility and rate of change — and it’s caught some off guard.
Historically, if you were making a product or providing a service, your only job was taking care of your customers. Now, technology has become so pervasive, it has become the core business. If business owners neglect technology, they do it at their own peril. They have to pay attention to technology by hiring the right people and interfacing with the right vendors who can help them navigate through technology and all its myriad uses in their own business.
A lot has changed with business technology and IT budgets today. Technology has gotten complex. The days of needing computers and an IT department for just basic accounting functions are gone. With social media and mobile devices, the world is connected any time, anywhere. Employees want to print from their mobile devices and access office computers, information and databases when on vacation. This makes it difficult for business owners to do everything in-house. Companies depend on reliable technology vendors, which act almost like business partners. By partnering with somebody attuned to technology, business owners aren’t spending time in areas they aren’t comfortable with.
When creating an IT budget it is important to understand that for most businesses the largest discretionary expense is IT. But you need a consistent IT budget, good times or bad. In good times, it helps you run your business and create satisfied customers. In bad times, you need to spend the IT dollars wisely to improve efficiency to gain a competitive advantage and provide better service at a lower cost.
When setting IT budgets, managements need to understand and be able to measure the direct relationship between IT and productivity. A trusted, proven vendor can help provide analytics that show the results of technology adoption.
A common concern of many business owners is the constant increase in IT budgets , while the level of service deteriorates. There is the additional element of unpredictability as new technology is introduced and needs IT investments. For example, software upgrades aren’t easy to manage. In addition, companies are finding they need electronic content management software to take full advantage of their technology, research and data. Without software to rapidly search the enterprise’s servers, efforts are duplicated or wasted, further stressing IT budgets.
Sometimes outsourcing is a good answer. Technology has indirect costs often left off IT budgets. The budget needs to account for the energy it takes to house infrastructure or the cost of rolling out technology. With labor, outsourced support can provide services more efficiently. The outside provider monitors a network cost effectively with better-trained people assigned over a large number of clients. Also, what if you need one-eighth of a network engineer and half of a firewall expert? Outsourcing helps a company only pay for what it actually needs. Anecdotally there are examples of a company switching to an outsourced vendor and seeing its IT budget increases slow from 10 or 20 percent annually to 3 percent. Customer service can go up in a measurable manner. With an outsourced vendor, costs are predictable, no matter the technology and how often it’s upgraded.
However, there are exceptions, based on the product or service. If your unique product or service doesn’t have skilled vendors for your particular area, you won’t achieve economies of scale. Also, you may not want to share proprietary knowledge with anyone, even an outsourced vendor.
There are measures that can be used to calculate ROI from outsourcing. First, calculate where you are now. Then, implement the technology and gauge key performance efficiency measures, with help from your vendor. Certain efficiencies are instantly noticeable, such as customer service or costs. Other complex technologies may take a few months or a year to generate results. It’s a matter of developing a strategic plan, following it and then measuring the results.