Where has all the money gone? – you wouldn’t believe it

Part one – why?

Previous installments:
IT investment for the small businessman and novice
Why the SMB/SME holds all the aces when it comes to IT
In our last instalment we talked about the advantage an SME/SMB has over it’s bigger rivals when it comes to implementing technology, especially around the aspects of communication, business change and lack of red tape.¬
Don’t let this reference to red tape fool you. It is mission critical to understand the difference between vital¬† process and red tape and it’s not always immediately obvious.
The key to cost cutting in any area is knowing what to cut. The word we are after is waste, but even that can be misleading.  In the world of Lean everything outside of the critical value adding moment is deemed to be waste, but nobody imagines that you can eliminate most of it let alone all.
The best approach is to look at where the money goes in a typical systems implementation.
Let’s take ACME¬† cash registers.
They have a turnover of 200 million and they have countless systems handling different aspects of their relationship with customers.  Nobody in the organisation has the full picture at any time bout any customer.
Sales people call with an Upsell proposition within an hour of the customer complaining bitterly to support.

  • Customer enquiries get written on cards and handed to salespeople who then lose a percentage or forget to mark them up so 14% of leads are never followed through. (any of this sound familiar)
  • The last time they tried a mass emailing they only had email addresses for 34% and two thirds of those were returned undelivered. This resulted in their IP address being registered as a spam house and for three months their emails were being destroyed by a robot and never arriving.

Ok this is just the tip of the iceberg, but you get the picture. The new VP of sales has read the riot act and reluctantly he has been promised that they will try and find some budget to help out. Where do we go now?
In our next contribution we will provide an insight into how not to approach it and the we will move on to  look at a simple model for getting this job done.
Requirement gathering the first big mistake

  About the author

 

Why the SMB/SME holds all the aces when it comes to IT

I know you probably wanted me to tell you how unfair and inequitable the world is and how tough it is to be small. We’re in that sort of phase just now. Well you are going to be disappointed, but I challenge you to read on anyhow.
Not only is it easier, cheaper and less risky to implement state of the art IT, but rarely do your big brothers tap into the advantage effectively once they have implemented it. Now there is a new twist that puts the smaller business back at the cutting edge.

Small is beautiful when it comes to costs

When I rolled out a nine million pound IT investment for a government department, I spent more than a million getting the messages through to the workforce that things would be changing and preparing them and yet another million fighting the bonfires to get it rolled out and accepted.
When I rescued a large project a few years ago, they had already spent close on a million on feasibility and had got nowhere with it.
Implementing a mission critical system for a huge nationwide organisation, I got to roll-out stage and not even the CEO could make IT go any faster, we waited three months while they  put us off with new problems each day and they negotiated for increased budgets for running the system that would have supported a medium sized island, despite having agreed all of this previously at planning stage. Each slight effort from IT requires forms, a process and a very long wait.(Partly justified, because bigger IT comes with bigger risks).

Small is beautiful when it comes to change

Bringing about even fairly small changes in a very big organisation is slow, very expensive and not at all guaranteed. ¬†The employees have no sense of connection to anything , or anyone, it’s just a huge employer and change is inconvenient. Customers have a stronger relationship with the brand than employees with their management and shareholders. Established employees can easily resist change without suffering any consequences and often do so just to prove that they can.

When a big business is forced to compete with small business on a level playing field, it is like a train attempting to  catch a rabbit.  Trains are only good for long straight and fairly even roads. While the train is moving the tracks, the rabbit is enjoying the grass on a greener slope.

Business case

The average cost of a feasibility study and business case for a large business today is estimated at around ¬£60,000. There are more stakeholders with more complex propositions and communication grinds to a slow shuffle. There is usually little or no true big picture and everything you produce then has to be reviewed on the basis of, “do I really look like that that?” .I recently completed a feasibility and prepared a business case for a large SME/SMB and it cost just¬† ¬£7k.
Rapid painless implementation
When that business described above comes to implement their plans, the system will be hosted on the cloud without a single click of a mouse by their IT department and it will be running and operational in a one day.
It will have world class back-up, disaster recovery, failover and  all the things an SME/SMB struggles to afford and  it will be maintained 24/7.
They won’t buy any hardware or purchase anything up front and their modest budget will be spent on improving their business to take advantage of the new system’s capability, communicating their requirements accurately to the service provider, training people to make their lives easier and their jobs more secure with this new super tool and getting their data into good shape to take maximum advantage.
 Dynamics of IT investment for the SME/SMB
 Where has all the money gone?
 About the author

 

 

 

IT investment for the small businessman and novice.

Previously:

The advantages a small or medium business has  over their larger competitors and how they can save vast amounts of money in implementing high productivity software and gain the benefits faster.

1. It investment should never cost you money, it is an investment and the ROI should be clear.
¬†Build a business case professionally and then invest with confidence.¬
The question to ask is; who would you rather trust with your capital, your own business, some investment bank, or maybe a fund manager?

2. Cash invested in your own business via IT systems or any other properly planned investment is always going to outperform any other investment and it remains within your control.

3. ¬†In a free market economy, you always have to match the performance of the market leaders sooner than most of your competitors, or you are out of business. It’s not optional. ¬†If they have automated successfully, you are at risk until you follow suit, or outdo them.

Types of IT investment

One thing every business man/woman or at least his/her CTO should understand is the dynamics of costs and returns  for different types of IT investment in different sizes and types of organisation and for different purposes.

There is absolutely no broad sweeping brush that can be used here and there are few reliable rules of thumb.  There are huge risks for the unwary and there are massive opportunities for the savvy, there are things that are not optional and things that are very much optional.

IT infrastructure versus productivity systems

The first big source of confusion is between the purchase or replacement of networks, servers and workstations, printers, operating systems and office systems like Microsoft Office.  The risks of a failure are dramatically less in this area and the potential to realise benefits and make gains are also much less.

Putting off the upgrade of workstations or operating systems by a year will rarely have any effect on bottom line unless you are losing time due to stoppages and unreliability.  This is an area where business cases need to be scrutinised with great care.

1.       Unless there is real risk of lost productivity, or very high maintenance costs, it is going to be hard to justify not keeping the old stuff as long as possible.

2.       Upgrading to smarter tools with new cool features will only benefit the one or two geeks on the team unless you take steps to train people on the new capabilities. Is that included in the business case?

Automating process

This is what business systems are really all about. The database replaced the card index and made it possible to share that information with colleagues globally, to search on fuzzy logic and to send a message at a single mouse click.  This was a pretty easy decision on hindsight and the business case is obvious now, but at the time, ditherers and weak leaders continued with their card indexes until they saw their customers walking into their competitors arms.
Plenty of leaders continue in the same vein today and every new step forward in technology will have innovators, early adapters, last minute Harrys and hard luck stories.

Technology is not the enemy

Since records began, businesses have had to find ways to deliver better products or services, do it at lower costs and win and keep more customers. There’s a¬†percentage at the top end of this battle and there’s a percentage on the way out, the rest are headed in one direction or the other¬†.¬† Businesses that choose to close their eyes to the importance of technology in this struggle have already consigned themselves to the scrapheap.

Face facts and make the most of it
Success at harnessing technology requires understanding a few basic rules and working with people you can trust to deliver.

Strategic advantage or state-of-the-art

The first big differentiator between software systems is their status in your market segment.
If you are considering a system that you hope will bring you in line with the main players, then this is probably “state of the art”, though if you are a long way down the pecking order it may still be classed as “strategic advantage“.
E.G.¬† If you run a large business carrying out maintenance type work like Sky¬†TV maintaining satellite dishes, you will have automated scheduling that plans the shortest routes and sends jobs directly to the engineers PDA or mobile. ¬†¬†This has cut operating costs by 25% on average for these businesses and is a fast maturing industry.¬†¬† If you want to bid for sizeable projects then you won’t stand a chance of winning competitive bids unless you have this in place.¬† That’s “State of the art” IT.
If you run a local cleaning business with a few dozen teams in vans and you are growing and ambitious, you probably don’t have this systems yet and your direct competitors probably don’t, so to you it is still probably “Strategic advantage” IT.¬†If you are serious about growing, guess what you will be planning now!

Not only will the ambitious smaller firms be scrambling to get this competitive advantage, but the guys at the top are already planning to push the bar up higher and guess what you will have to do when that happens!

There’s one fact that is simply unavoidable whether it thrills you or fills you with horror;
Competing and winning in business in the 21st century is primarily about winning the technology battle.
 Where has all the money gone?
 About the author