September 6th, 2012
Is IT an asset or a liability?
For many businesses, IT is one of those ‘can’t live with it, can’t survive without it’ areas of the business. Once, maybe a few years ago, you spent out considerable sums of money on it and now feel that you should be getting the return on that investment – not investing even more into it. Sadly, systems get outdated and what worked a few years ago may now be outmoded.
Even major multinationals struggle with how to keep up with change and technology. Computing magazine reports that in its Biting the Bullet report, IT organisation Intellect has said that banks’ IT infrastructure is no longer fit for purpose, citing the 2008 banking crisis and recent systems failures by UK retail banks as weaknesses of the financial system that need to be rectified. “The report said that nearly 90 per cent of technology budgets in US and European financial institutions is spent on managing and maintaining legacy systems, which left only 10 per cent for innovation and programme development”.
You may be better or worse than that. However, it is an important part of the business to ensure that your systems are fit for purpose. So an important first step might be to compare the system with the needs of the business and identify where it is working well, where it isn’t and where additional function might be needed. In step with this, you should also begin to see where there are risks to the business. I remember visiting a business a few years ago where the entire materials purchasing system was contained in a single Lotus 123 spreadsheet with no apparent back up. If that spreadsheet failed, production would grind to a halt in a matter of days. Not all risks are as stark as that, but, in the spirit of confronting brutal facts, they need to be noted and acted upon. I’m not saying that you, as CEO, should perform this audit, but I am saying that you should be actively involved with interpreting it and ensuring appropriate action.
Are you, as a business, an innovator or a laggard? In the late 1940s, Joe M. Bohlen, George M. Beal and Everett M. Rogers at Iowa State University came up with the Technology Diffusion Model. The process of technology adoption over time is typically illustrated as a classical normal distribution or “bell curve.” The model indicates that the first group of people to use a new product is called “innovators,” followed by “early adopters.” Next come the early and late majority, and the last group to eventually adopt a product are called “laggards.” Later work has identified a ‘chasm’ between early adopters and early majority where some technologies simply fail.
Actually, it may be better to identify your different needs from technology before deciding where on that curve to be. For areas such as accounts, which are necessary but probably not competitive differentiators, being in the early/late majority is probably fine. In areas where you are fighting competitively, maybe in customer service, you may choose to innovate or adopt technology early to gain an advantage. The first manufacturer to go ‘lean’, the first retailer to sell online gained some first mover advantage. In some markets, that advantage is sustainable, in others, you just get caught by the pursuing pack – hence, for example, Apple’s need to innovate constantly.
To change your systems there are several choices. Once it was buy or build. Now you can rent, or pay according to volume of use as well. Packages come with standard function and with flexibility to adapt to your specific needs – though beware too much customisation which may be difficult to maintain later. Sometimes it is better to change the business than to change the software.
Know what you want a system – package or build – to do and break that down into what MUST happen, what would be nice to have and what would positively set you apart from your competition. Match that to packages or work with a developer to specify it for bespoke building, knowing the economics of your business case so that you don’t overpay.
If you are building, don’t overspecify. Consider a lean approach, delivering the minimum viable product, getting that into action and then adding modules and features to it. That way you will see a return on investment even as you are investing.
Once you have a new system, remember that it needs to be looked after well. Make sure it is well documented and, if it is bespoke to you, that you have people in the business who know how it works and can fix it if it doesn’t. Spread that knowledge because losing the one person who knows how to do that is a huge and unacceptable risk but one that catches many businesses out.
Keep reviewing what the system does and how it does it. Keep the requirements of the business in front of you and measure performance against that. Remember that the business world keeps changing.
So must your IT.