Powerful Investment in IT for SMBs
A well planned investment in IT, at the small business level, can be linked to an increase in productivity and a strong return on your investment. This article will explore:
- How do I decide what IT elements to invest in?
- What is the Return on Investment for each stage, in annual terms?
- What level of IT support does my small business need?
- How reliant is your business on technology?
- As a small business owner, what sort of IT skills should I have?
- What are my competitors doing?
According to the most recent CDW IT Monitor, 54 percent of IT decision makers at the small business level believe investment in IT infrastructure improves their company's performance — up 10 percent since the survey last year. In addition, 46 percent of IT decision makers in small businesses plan to replace or install software (up 3 percent), while 34 percent expect to invest in hardware in the next six months — an increase of 4 percent since June 2009.
When your business is under stress — as many businesses are these days — owners frequently turn to IT investments to lift their competitive position. Nevertheless, in order to select a targeted IT investment most suited to your small business, you will need to consider the following questions.
How do I determine what to invest in?
To decide what you should invest in, it is wise to seek specialist advice. This external input will begin with a review of your business plan and align your IT plans to the needs and goals of your business.
Stages for the progression of IT investment proposals:
- Review your current business processes and workflows — Write these down in a flow chart to help you visualise. Nominate people and assets committed to each stage.
- Measure your current IT expenses, including capital purchases, software, support and communications elements.
- Engage a trusted, professional IT systems advisor — They will recommend specific stages of your workflow that could benefit from systems and software.
- Measure the projected return for your business from each proposed IT commitment.
What is the Return on Investment for each stage, in annual terms?
Your Return on Investment (ROI) should be measured in annual Return divided by the IT project investment, as a percentage. The ‘return’ can be measured in cost savings, or incremental revenues (less cost of goods sold). Suppose ‘time savings’ is present as a weaker investment return, and it is not recommended as the primary justification for an IT investment. A recommended benchmark minimum return might be 20 percent per annum, in consideration of the execution risk and your cost of capital.
Your assessment process can be enhanced if you engage a trustworthy, objective advisor, who understands targeted IT implementations. They should have experience in your industry and can help tailor a system package to align with your precise business needs.
Tip: Double check that your advisor is objective and that they will find you the best solution for your business — not just promote a solution from a vendor with whom they have a commercial relationship.
What level of IT support does my small business need?
IT support demands of small business tend to be greater than many owners realise and many businesses are too small to employ specialist staff; hence IT support is frequently outsourced. In those instances, specific personnel and clear escalation procedures need to be documented and communicated to your in-house IT team.
How reliant is your business on technology?
When answering this question, consider this example: If you are operating leanly with a few computers, a phone network and internet access, then you’ll most probably be able to outsource your setup and service costs to a small IT firm.
However, if your business is more Web based and you’re running an ecommerce platform, it may well be worth bringing an in-house IT person to assist with management, at least temporarily. While this may cost more, it will help iron out problems before they turn into catastrophes.
As a small business owner, what sort of IT skills should I have?
Many small business owners make the mistake of taking on too much personal responsibility for IT, often assuming the de facto role of IT manager. This can be problematic, as you not only need a specialised skill-set to perform many IT tasks, but performing these tasks can consume valuable time that owners need to spend on the business itself.
While specialist skill-sets should be left to the experts, there’s also no harm in learning some basic technical skills yourself. If you learn how to troubleshoot some basic computer problems, you’ll save time and money — but keep this to a minimum.
What are my competitors doing?
If you don't know where the value of IT is for your business, and you fail to invest, you may be left behind in your industry. Chances are that your competitors will be able to do things faster, at a better rate or with a better outcome than you can.
Today, with increasing globalisation, this just isn't viable. As technology becomes more readily available and with the increase of tools like social networking, the gap between those who use technology to get ahead and those who don't, is increasing and obvious.
In conclusion, some key takeaway points for your consideration with targeted IT investment for SMBs include:
- Begin your IT investment process with a thorough review led by external specialists, where this produces a clear picture of what you need, what the return will be and why you need to invest.
- Don’t avoid investment on IT. It may leave you behind your competitors — and cost you your business. Every business needs to keep moving forward, as the world waits for no one. “Measure twice, and cut once” is a good mantra to follow.