Process And IT Costs
August 30, 2010
Do you know if there is any value at all coming from your technology investment?
Unfortunately for many SME’s, they don’t know. One reason for this disconnect is that we can have very little understanding on when money spent on IT is an investment, or well, just an expense.
One way to improve your value for price in technology is to look at where that money is being spent. And for many small to medium business, the primary two buckets your IT spending will fall into is supporting your direct activities or to increase their effectiveness. (note that more strategic use of IT for driving growth is beyond the scope of this post)
Process, IT Cost And Value
I want to demonstrate that taking a more holistic look at the way you do business can improve IT spending by ensuring that your IT spend is is being applied to those two buckets.
When there is work being performed, and that work is performed more than once, you can be sure that you are looking at a process. It may not be articulated, or formalized as a process – but it is a process.
As a SME business owner or executive, if you were to write down each step, and each event that happens when a new or existing customer calls looking for your product or service – what would that chain of events look like?
Many of us will make a mistake here!
We have the tendency to say; ‘Well sales gives that information to person ‘X’ who gets it out the door…’
I guarantee you – in most cases, you would be wrong.
I state wrong, because that statement is a generality, nice to say, but usually not the exact steps being performed.
If you look closer at what actually happens, it may look more like this;
a) phone call / email is received – maybe written down on a message slip?
b) if it is an existing customer, perhaps terms or conditions are looked up?
c) if a new customer – perhaps you collect information? even just in email?
d) is a message slip handed over to someone else to look at inventory or availability?
e) perhaps forward that message slip or email to someone else who can schedule or ship?
You get the idea. It is very, very rare that what you think happens in a particular situation is actually what is really happening.
Note: For a real example of a ‘process’ in action read this post titled; Don’t Automate Broken Processes
Once you have taken some time and drawn out each of these tasks and steps, you can begin to see where your technology investments can be made to support your direct activities.
In this case, any IT tools that can reduce manual steps and work in this process can be considered as directly supporting your activities.
To take a step further, look at how long each of the tasks you identified in the previous step take.
Did you find one area where the majority of time is wasted before your product or service can actually be delivered to your customer?
Real World Example
A company I am familiar with is using an on-line sales force tool to track their sales funnel. In your sales funnel, I know that there are some critical numbers needed to gauge your success. Simple examples could include gross margins, cost of sales etc.
The automation tool that this organization was using had some sophisticated advanced metrics reporting, but as a higher cost option.
Because they wished to avoid paying for this reporting option?
From the president to the sales director, five senior people spend hours per month collating the data required for those metrics!
Looking at the time being wasted in their processes has shown them that getting the additional automated reports is more than worth the cost, in other words, to increase the effectiveness of their process.
The SMB Takeaway
Is a tech spend proposal supporting either of those buckets?
If not – why are you spending it?