3 traps that prevent SMEs from having effective IT strategies

Business Technology Trends & Culture - November 7th, 2003

by Nichiai

Many smaller firms have poor IT strategy despite being aware of the major role IT plays in their business. They have to address this to avoid winding up at a competitive disadvantage as other firms pull ahead.

Primarily this involves find­ing ways to ensure IT is used to support and improve business processes. When done properly this can help increase efficiency, productivity and the ability to serve customers well. To discover why SMEs become stuck, we should examine the forces at work which trap them. Once these are understood, a firm can map out an escape route.

Trap 1: The need to con­serve funds

The pressure to minimize costs combined with inevitable cash-flow concerns causes small firms to wait as long as possible before investing in new hardware or software.

Consequently, they make do with sub-optimal equipment and, often, mismatched and outdated operating systems that pre­vent the use of the latest applica­tions. This “minimize costs” pressure also causes plenty of firms to make ill-advised deci­sions with regard to support for IT systems.

Some subscribe to the “go without” philosophy and do not retain support. Another common route is to rely on the per­son in-house who knows most about IT to provide the support. The main downside to this is they are often pulled away from what they should really be doing, and they generally do not have the required skill-set to carry out the role efficiently.

All of these routes can end up costing more money than they save, through increased time spent trouble-shooting, produc­tivity losses and missed opportu­nities. These are hidden costs, but checking into them can help lead to informed decisions on the optimal solution, rather than the short-termism of the cheapest solution.

Also, while it may be difficult to get good prices directly, firms can purchase through a third party that can avail of better pric­ing and pass on some of the sav­ing. In addition to saving money, this can enable a company to:
• Stop buying cheap, soon-to-be-obsolete hardware.
• Be more “future-proof,” and retire machines periodically.
• Use newer applications with the benefits of increased capabilities and productivity.

Trap 2: Lack of security and backup

Even the best hardware can fail – and if there is no data backup, huge damage can result. Nichiai was once retained by a client that had failed to ensure its backup system was running smoothly and, after a server failed, three years of critical data was thought lost. The resulting disaster recov­ery project managed to restore all of the data, less two weeks of it. However, huge cost, especially in lost business, could have been avoided with proper ongoing IT investment.

Failure of hardware over time is guaranteed.

Damage caused by viruses or the hacking of unprotected sys­tems is also often overlooked. The only easy solution for this lack of IT knowledge is to build a rela­tionship with a firm you can trust to give you good advice, or to hire somebody with it – the former is certainly the cheaper option.

Trap 3: Being unaware of shifts in the competitive landscape

Historically, customer care has been a characteristic of smaller firms more than one of larger firms. But Customer Relationship Management (CRM) is changing this. It gives any firm the ability to have faster response times and better know­ledge of their customers.

While the key word is “rela­tionship,” which is still very much human, CRM applications are enabling larger firms to make customer care the next competitive arena.

Smaller firms, therefore, risk losing their edge unless they adopt applications to support their CRM processes. Realization of this shift in the competitive arena is a key step in avoiding the trap.

Historically, customer care has been a characteristic of smaller firms more than one of larger firms. But Customer Relationship Management (CRM) is changing this. It gives any firm the ability to have faster response times and better know­ledge of their customers.

The pressure to minimize costs combined with inevitable cash-flow concerns causes small firms to wait as long as possible before investing in new hardware or software.