The information technology landscape has changed a great deal over the years, and not just with the technology itself. Corporate technology philosophies have also changed. In the past, it was generally seen as a good idea to spend as little as possible on tech until spending became necessary. This often meant using software and equipment that was several years old, and only upgrading when things got to the point of decreasing efficiency and productivity.
These days, that decrease in productivity and efficiency can come much more quickly, since the technologies themselves are constantly evolving. If you don't keep up, you'll get left behind. This is largely seen as a major element of competition; you can no longer afford to let your technology stagnate for years at a time. It's bound to become detrimental and cost you more in the long run.
Unfortunately, it's not getting any cheaper to maintain your IT department. According to data gathered by Outsystems from various industry analysts and reports, 80 to 85 percent of IT budgets are spent just to "keep the lights on" while backlogs are compounding at a rate of 10 to 20 percent a year, and 42 percent of the initial cost of applications is spent "year after year" just to maintain them.1
There's no question that businesses are largely recognizing the importance of letting IT play a bigger role. Seventy-two percent of small business owners believe new technologies will offer a bigger return on investment than new employees, per a survey from Brother.2
"Our survey shows that while small business owners understand the value of new technologies, they are still a bit overwhelmed and struggle with choosing the right time to adopt them to have the greatest impact on their business," said Brother Vice President of Marketing John Wandishin.
Smartly allocating your IT dollars can mean reaching more potential customers and maintaining a more fruitful relationship with existing ones (not to mention with partners). It can mean getting a leg up on your competition in customer service and the products and services you provide. It can also mean giving you better data to make better business decisions and can even help you reduce costs as you streamline operations and make improvements to efficiency.
Obviously, the technologies among which you choose to allocate your IT spending are greatly dependent on your business model. Utilization of social media and/or location-based services may factor into the equation. In most cases, much of the focus is in the cloud, mobile technologies, and virtualization.
As you figure out how to spend your IT dollars, it's imperative that you have as good a handle as possible on the technologies your competitors are leveraging. You don't want to fall behind them, and if possible, you want to stay ahead of the curve. However, you also need a good understanding of how this technology can actually contribute to your success. Don't fall into the trap of “shiny object syndrome,” getting excited about every new technology that comes along, without checking to make sure it will actually add value to your company. Technologies that lead to greater convenience for customers and/or partners are likely to be worth investing in, but that doesn’t apply to every new “shiny” IT product.
Being smart about IT spending means more than adjusting your IT budget each year. It takes careful planning and analysis. Evaluate the opportunities (as well as the threats) that await your company due to various aspects of your infrastructure. Spending can get costly, but if you play your cards right, it's a drop in the bucket compared to the potential revenue and overall cost-savings you can experience.
It's also important to allocate your budget in a way that allows you to remain flexible. It shouldn't be too difficult to change course when things don't go as planned or if game-changing technologies come along and require adaptation. Also, keep in mind that the technology is only as good as how it's used. You must put the effort into understanding processes and hiring/retaining the right talent, not only in the IT department, but across the company – anywhere tech impacts job functions. Don't skimp on proper training.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.