June 22 2015

When to Under Invest in Technology

Posted on the 02:19 pm under Business,Network Management,Productivity by Darren Boyer

The problem is so seemingly pervasive even the federal government acknowledges most Canadian businesses under invest in technology.  Industry analysts often cite the same in study after study.  This underinvestment is then considered a direct link to why productivity is lower in Canada versus other nations.

Having worked as a technology consultant for over 7 years now I see some of the root causes to under spending a little clearer.  First off, most of the business owners we have worked with are very hard working and or interested in profits.  If they have stepped away from the business there is almost always a manager in place who still cares dearly about the profitability of the organization.  Most, for example,  shop vendors or prices at one or two sources to help ensure they are getting the best value.

Given this active interest in controlling costs and a track record of managing for profitability if there was an opportunity to invest in technology and increase productivity why not do it?  The results should be a better bottom line.  It should therefore be an easy decision to find the technologies with the highest return on Investment and approve them before the competition does.  With the potential for technology to become an enabler to do things better faster or cheaper this chronic underinvestment can seem perplexing.

I don’t believe it is perplexing at all.  Many organizations under invest because they don’t really trust the technology organization they are dealing with or the results from technology they have gotten in the past.  Whether it is an industry specific consultant coming in to leverage key drivers in that industry, or a generalist consultant from a bank or accounting firm the primary reason why more money isn’t spent is that the management team doesn’t really believe that the changes are going to make a material difference to the bottom line.

The size of most Canadian business is a leading indicator of why they can’t get advice they trust.  Industry Canada reported in July 2012 that 98% of all Canadian businesses have less than 100 employees.  Many of these organizations already under invest in technology to start which reinforces an inner built in bias that the results from technology aren’t that great for them, that somehow their organization is different.

Put another way the chronic underinvestment leads to a chronic instability of technology because too many ‘band aid’ type solutions need to be applied to keep operations running in the budget constraints given.  These ‘band aid’ need not be infrastructure.  Many times people or planning are just as piecemeal in their delivery as poorly configured technology.  Since this approach often leads to mediocre results of Information Technology performance over the long term it becomes inwardly very hard to trust investing in technology because the management team remembers the inward pain it cost them the last time they tried a new initiative.  Given these dynamics, even when an outside can see very clearly how much better a new technology can help them the management is weighing the potential benefits against their past experience the LAST time they spent money on technology.  Consultants, governments and analysts can’t see this pain.  But the pain is real and it came from the previous results when the budget and talent often wasn’t there in the first place.

Even in our client base the clients that like and trust us the most have the easiest time reviewing new technology initiatives and increasing their technology spend.  Typically the clients who underinvest and then get the mediocre results from underinvesting trust new initiatives even less.  This is a paradox but happens all the time.

So as a business owner if you can’t really trust your technology or your vendor I understand not wanting to spend any more money no matter how good it sounds.  My recommendation would be to solve the trust issue by getting better results first and then go back and review those new initiatives.  Until then remain under invested.  I read one time where a new Chief Information Officer at a big firm was told ‘Look if I can’t trust you to keep your operations running how do you expect me to believe your new recommendation.’  Agreed.

From our experience the average Canadian business needs to increase their spending on core infrastructure and support by 60% BEFORE starting any new initiatives.  It may seem counterintuitive but increasing that spend will increase the trust management and staff have in the current IT infrastructure.  Once a good level of trust is established the quality of the project execution and results it delivers will change significantly.  Put another way the success of a new accounting system, Enterprise Resource Planning (ERP) system, new POS system, new collaboration or unified communication system is directly tied to the current quality of the rest of technology operations.   If getting the maximum potential from staff and matching the productivity metrics established in other countries could deliver value to your organization weigh this increase in technology spend against the potential productivity boost.  To discuss specific initiatives and the current state of any productivity gaps or trust gaps in your organization feel free to give us a call.

Written by Darren Boyer

Darren Boyer

Darren Boyer is the founder and president of pcit.

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