Information Technology For Business
Computers and
information systems are essential parts of every business today.Like
accounting and legal, every business needs to invest in technology to compete.Technology is both a cost of doing business, and an opportunity to do more business. Most
people I talk with recognize the necessity of having a computer, an email
address, and a web site, but still look at the upfront cost more than other
issues. After spending some time working with dozens of businesses, I think
it's time to take a step back and look at the big picture of technology in
business. Let's take a reporter's view of the topic, and ask the basic
questions: who, what, where, why, when, and how much? For today, we'll keep
this short, but each of these questions deserves a more complete article in the
future.
Why?
What are the benefits
of technology for a business? There are many, but most fall
under a few categories: Reach more potential customers, develop a businessrelationship with
potential customers Streamline operations, reduce costs, improve efficiency, maximize profit,
minimize waste, devote talent to core business instead of overhead
Provide better service to customers Support better relationships with key
partners Allow customers to better guide the business The very first question
businesses should ask before spending any money or time on technology is, “why
am I doing this?” If there is not a core business benefit to be gained, why do
it in the first place?
How Much?
Established
businesses outside the technology industry typically spend between ½ percent
and 10 percent of their annual revenue on technology spending,
depending mostly on the industry.Manufacturing and
retail are typically at the low end of this range, while finance and health
care are typically at the high end. If you're at the low end of technology
spending for your industry, you may be missing out on some key benefits
technology can provide. If you're at the high end, you may be spending more
than you need to on proprietary solutions, or you may be leading your industry
with
some strategic
investment.
What?
What costs do you
need to consider as part of your technology budget? These break down into
several categories: Initial cost—hardware and software, and training Ongoing
cost—maintaining systems, including licenses for proprietary software, hosting,
and support Upgrade cost—cost of upgrades, and expected lifespan of
systems/frequency of upgrades Value proposition—how much employee time will the
system save? How much new business could the system generate? Opportunity cost—how
much potential revenue is lost by not implementing a system? What are your
competitors doing in this area? Risk—what are the risks of a particular system?
What does it cost to mitigate
those risks?
Where?
Should you spend most
of your technology budget on infrastructure, hosted applications, custom
line-of-business applications, or what? The answer to this depends a lot on
your industry, but even more onyour specific business.
Generally, most businesses spend around half of their technology budget on
infrastructure—computers, networking equipment, and Internet Service Providers
(ISPs). As the world moves more and more online, and open source software
becomes more compelling, there are huge opportunities for savings in these
areas, for businesses that can take advantage of them.
When?
There's a fine line
between too much and not enough. Spend too much on technology, and it will
consume your time and budget, leaving you ill prepared to do anything else on
your business. Spend too little and your competition may improve their business
to the point that you can't
compete. You need to implement enough technology to see a real benefit,prevent the worst
disasters, and not miss out on any major opportunities, while not spending more
than you can handle. Technology has a cost not just in dollars, but also in the
timeyou and your
employees need to spend adapting to it. Bite off too big a chunk and technology
becomes counter-productive. Nearly always, small, incremental, ongoing chunks
are a better way to bring technology into your business than large
all-or-nothing systems that promise to do everything right away.
Who?
Finally, you need to
decide who to help you implement technology in your business. Will you do it
yourself? Do you purchase an off-the shelf product? Do you use free software?
Do you hire a programmer to create a custom system? Do you use a hosted system?
Do you hire aconsultant to help?
Obviously, as an open source consultant, I think the answer is usually hire a
good consultant to help you use as much quality free software in your business
as possible. Whether or not to use a hosted system depends on your specific
business needs. Off-the-shelf proprietary products
are quickly becoming the least favorable way to go, but there are still a few
niches where there isn't a viable alternative.Many businesses are stuck at a tactical level, trying to
stay ahead on cash flow and payroll, and don't have time to think about
technology in a strategic way. But a strong plan for technologyshould be a part of
every business plan, and re-evaluated whenever taking a strategic look at a business. If you need assistance answering these
questions in your business,
Simulation for business in excel
would be happy to help.
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