In the face of change, why you should reduce IT costs

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Originally published on LinkedIn.

Change is hard.  Anyone who runs a business knows that it’s a constant state of flux.  I’ve experienced this in a highly competitive industry, at the forefront of the one thing that can make or break a business – technology.

Yet while we all know that change is inevitable, we try to hold on to the things that we think matter the most. When customers expect and demand more for less we try and accommodate by cutting in to our margins.  When technology fails we spend more and more money to fix it.

But one change is inevitable and that is the transformation of your business to being one that adopts new technology – quickly.  The playing field has changed.

Level the Playing Field

Businesses who start up today to compete against you don’t have the competitive disadvantage of a high cost technology system.  They’re agile.  They avoid infrastructure (servers and complex expensive software) and they choose tools that will get the job done – these are primarily in the cloud.

Until recently, your IT spend has been largely invested in equipment along with software and the people who manage those components.  But agile competitors haven’t had the luxury (or the consequential battle scars) to go down this path.

Instead, their mindset is around getting the job or task done at minimal cost and utilising any remaining cash to innovate and generate new business.

In order to be competitive you need to reduce your spend on old IT, and increase your spend on new IT and innovation.  Companies who understand this concept – intuitively or otherwise – have a higher probability of success than the many who do not.

 In order to be competitive you need to reduce your spend on old IT, and increase your spend on new IT and innovation.  Companies who understand this concept – intuitively or otherwise – have a higher probability of success than the many who do not.

Reinvest in Innovation

Innovation is an overused term.  Some might call it disruption but those are arbitrary terms.  There are many case studies on failure to change – Kodak’s failure to adapt to digital or the global taxi industry’s failure to meet mobile technology to name two… and the bottom line on these high profile examples is that when an opportunity to change is presented then battening down the hatches and sticking to your plan from 10 years ago just doesn’t cut it.

Innovation is freeing your organisation of the old methodologies and one of the oldest and most costly methodologies is maintaining a dated IT system.

When you’re maintaining you’re not growing because the focus is on ‘keeping the lights on’.  Your new competitors may have trouble keeping the lights on too – but they aren’t managing unnecessary costs and they certainly aren’t drawn in to IT problems in the same way a traditional business has been in the past.

Cutting IT expense

Of course, you need IT.  Every single organisation in the world from a coffee shop to a global enterprise are reliant on some form of IT.   There is a baseline cost to IT for everybody.

But the types of IT costs are changing.  I met with a high profile real estate expert today who has never had a server, never had an office lease but manages an entire team Australia wide with online technology.  He skipped a generation of negative IT expenditure and selected the tools that made the most sense to his business.

The old IT is commoditising.  When you buy a traditional IT product like a laptop you can look online and see the best possible price or visit the Apple Store in any country to find the same product at the same price.

The same commoditisation is occurring in services, servers and software.  These are things you should be looking to change – but don’t stop there.

Where to Invest

If you’re saving on IT costs – something we help organisations do every day – then where should you spend your saving?  I’d like to say it becomes instant profit – that may be true for a short while – but if you are in any sort of competitive business you won’t have long before technology catches up with you.

The new wave of IT investment is in things like:

  • Cloud that allows you to scale and work from anywhere, minimise business disruption and reduce IT department costs
  • Software as a service – tools that work purely online and reduce the number of steps in a process like servicing a customer online, sending out a bill, receiving a payment or marketing to a broad network
  • Process engineering – looking at what your people do manually and making it easier, this often requires expertise that aren’t inherently found in a traditional IT department or IT service provider but can add substantial value to your company
  • Development and R+D – Kodak knew there was a threat but they didn’t build an alternative to their film business, the senior ranks of the taxi industry saw Uber coming and refused to pivot

Change is a part of life.  We’re all going through change – perhaps you need to change in order to grow your company, or perhaps your company is at a peak but you need to be more efficient.  Technology is intertwined in to either of these objectives.

Is it time to change?

James is the Managing Director of I Know IT, a company founded on the basis that your IT should simply work.  Once IT is working the goal is to use it to your competitive advantage.

1800 456 694

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