Small and medium sized business owners and managers up and down the country have been given the credit and responsibility for returning the UK to sustained economic growth. The government has made a great deal of its efforts to cut red tape to support small and medium enterprise (SME) business expansion, and there seem to be hints of economic recovery emerging as we come into 2014. In this context, then, are the worries of business leaders a thing of the past?
Of course not. As both the prime minister and the chairman of the Bank of England have commented, recovery “takes time”. We’re in the middle of a process and this context sets the parameters for concern for all business leaders: ones of managing growth, risk, competitiveness, agility, resilience and profitability in an increasingly aggressive global marketplace.
The role of IT for recovery and growth
What space, then, does information technology occupy in this context? I would argue it fulfils three key roles:
First, IT is an enabler of modern business practice. Whether this is in delivering e-commerce or in streamlining financial reporting, modern IT is vital in ensuring productivity and competitiveness.
Second, IT increasingly is the product of a modern business. Amazon and Tesco both built website infrastructure to support their direct sales e-commerce models. Today, both businesses sell their technology platform and brand to other businesses.
Third, IT enables new business models. Businesses may find that the information they obtain as part of one business process is valuable to another – whether this is automotive telemetry data that can be sold to insurers, anonymised patient data that can be sold to actuarial or pharmaceutical companies, or customer insight data that informs new marketing and sales practices.
Buying in IT in this context then, becomes more challenging then ever before. There’s endless choice and business leaders – who may have limited interest in or knowledge of IT – have to face decisions on the level of control they want over their infrastructure, the degree to which it is secured, the skills they need to maintain it and innovate from it.
Not investing in IT? Not an option. As private equity investor Luke Johnson commented in the Financial Times recently – the spectre of flawed IT ought to scare us all. Indeed, Johnson credits underinvestment at the heart of the issues following his backing of a traditional retail business. Johnson wrote: “…its technology strategy was deeply flawed and it suffered from a huge under-investment in systems. It had not built its own ecommerce platform. It totally lacked any form of digital marketing presence. Its electronic point of sale systems were useless; its stock-keeping and logistics software and hardware were redundant; its management accounting was in disarray.”
The principles of IT investment
What, then, are the practical principles of IT investment that SME business leaders need to be aware of?
1. Manage your risk
The more central IT becomes to your business, the more dramatic the consequences of a technology failure. A retailer who loses e-commerce capabilities during a flash-sale, promotion (a Groupon deal, for instance) could lose out on substantial revenues. The more regulated your industry, the more control you’re likely to need over your IT. Data protection requirements, for example, can be extremely stringent about customer data in different contexts. And indeed, the more sensitive your industry or your supply chain, the bigger target you are for cyber criminals; for instance, betting firms or retailers that carry credit card information.
This is one of the reasons that, despite the enormous hype, very few businesses’ IT processes are moving to the ‘public cloud.’ Analysts forecast only four percent of these processes will move onto these public internet services, such as those sold by Google and Amazon. Most organisations of any scale prefer what’s called a ‘private’ or ‘hybrid’ cloud, entirely or primarily using business-owned IT that has made available, securely, over the internet. It limits their risk, gives them the ability to build in additional redundancy and resilience, and avoids complex questions around ‘data sovereignty,’ privacy laws and the like.
2. Be aware of the technology context in which you’re operating
Today’s society is increasingly characterised by the collision of four major technologies: internet-based services or the ‘cloud,’ mobile technology providing ubiquitous internet access, social networks facilitating new connections between consumers and businesses and the large repositories of data underpinning it all. Some have called this the ‘third platform’ of computing.
For all businesses that are looking to grow in this context, the implications of these technologies need to be taken into account. Even a small chain of hairdressers could stand to benefit from capitalising on online appointment booking, digital and social remarketing to their customer base, using data insights to manage stock, stylists and prioritise traditional marketing. For services and manufacturing businesses, the implications may be even more profound.
Understanding the context of this third platform on some level opens you up to digital creativity that may help accelerate your business to a new level.
3. Ensure that whatever your IT, you have the agility to change
Modern IT has to flex to the requirements of modern business practice. Things simply move faster today than they did before; if you decide to bring a new product, service or promotion to market, you can’t wait for servers to be deployed, developers to become available, for code to be compiled. New, agile methods of web development, and IT that is defined by software, rather than discreet and rather more cumbersome physical hardware and software, is giving businesses of all sizes the ability to react to change far more rapidly than ever before.
4. Prepare for the Internet of Things
There have been jokes about ‘internet connected fridges’ going around since 2000, but the potential for the internet of things is far greater than this. If a manufacturer of widgets collects anonymised usage data from their products, they can use real-time customer insight to design the next generation of products in precise alignment with customer needs, use sensor data to anticipate the need for repairs ahead of failure and deliver customer service a cut above the competition, or market or remarket to customers who might need a replacement widget. And the widget needn’t be significantly high tech – internet connected sensors could be embedded in your boiler; in your PC; in your toaster or PVR, and could set you apart from the competition in a world of hyper connected consumers and smartphones.
There’s no question that the information technology shaping the context for modern business growth is complex, but it needn’t be overwhelming. Indeed, the alternative, as Johnson noted, is complete failure. So the leaders of any ambitious business needs to educate themselves to the point where they can have meaningful conversations with their colleagues, suppliers and consultants and set themselves up with the capacity for growth in the digital context of the third platform of computing.
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