Be strategic about upgrading your information technology
In today’s business world the only constant is change. Nowhere is this mantra more evident than in Information Technology (IT). No sooner has an IT solution been installed, and you’re evaluating, testing, justifying, and re-installing it. Understanding what’s needed to strategically upgrade your technology will keep you competitive as a market leader. Indeed, technology changes so rapidly that it often seems as if you’re in a constant state of flux. It certainly seems like an endless cycle; however, it can be all worthwhile if you start the process by clearly understanding the link between corporate performance and effective IT management. Which companies are better at understanding this link?
Market leaders use IT to enable business strategy
Market Leaders, those companies that are leaders in their markets and industries, are more effective at using IT to enable their business goals. Why? Because they often deploy IT more strategically, and in doing so, maximize the impact IT has on corporate performance. For example, Market Leaders are better able to adjust spending levels to fit the economic environment. By investing more during up-cycles to automate and transform business processes, they can invest less during down-cycles and still benefit from better business performance — in part due to greater IT automation. It is the constant attention to strategic IT investing through all economic cycles that often separates Market Leaders from ordinary companies.
It is estimated that annual IT spending ranges from 2 per cent to 10 per cent of revenue in most companies. On average, companies spend 70 per cent of their budgets on operating and maintaining existing IT systems, and 30 per cent implementing new systems. However, consider the fact that the ongoing operational cost of a new system can be over 20 per cent of its implementation cost. Further, companies that reduce their IT budgets or keep them flat also often cut new systems investment more than they cut ongoing operating expenses. As a result, new business capabilities are sacrificed at the expense of fixed operating costs, which negatively affect business value and growth. The bottom line? Those companies that exhibit Market Leader attributes and more effectively control their ongoing operating costs have a competitive advantage.
It’s not how much you invest, it’s how you invest
Rather than calibrating their total IT spending to industry benchmarks , as many companies do, Market Leaders distinguish themselves by how they invest in IT, most notably in strategy, governance and implementation. In effect, it’s not how much you spend on IT, it’s how strategic you are in deploying and upgrading your IT that maximizes the impact on your corporate performance.
Follow these 5 steps to ensure your IT upgrade is strategic
How can you tell if the time is right for yet another technology upgrade? How can you assess if you’re making the most effective decisions? Think like today’s Market Leaders and take it step by step:
Step #1: Classify the upgrade
In order to make effective upgrade decisions, you should be clear about the nature of the upgrade and why you need it, for example: for updated functionality; new features; correction of bugs or other flaws; or if it’s simply an opportunity to get the “latest and the greatest”. Consider how the upgrade fits in with your current technical environment. This involves a careful consideration of technical specifics, your ability to install and maintain the upgraded solution, costs, and likely benefits.
Step #2: Assess the benefits
The next step in the assessment process is to evaluate likely benefits to be realized from the upgrade. You may be looking to correct serious problems that currently interfere with business or technical operations, improve systems performance, operational reliability or systems security, replace older systems that are no longer supportable or other important benefits. Be clear about what benefits you want out of your IT upgrade.
Step #3: Assess the value
Next, you will need to determine the value of any, and all, possible benefits to your business or organization. After all, just because a benefit exists, that does not necessarily mean that it offers sufficient value to warrant the expense and effort. The value of your upgrade can be defined as being: critical to prevent serious consequences such as a systems failure; it may provide certain benefits, but it is not vital to continued technical or business operations; or finally, it offers no tangible benefits at this time and therefore, no value.
Step #4: Assess the scope
If you determine that there is value in the proposed upgrade then the next step is to evaluate the effort involved in planning, installing and supporting the upgrade. First, review the tasks required for planning and implementing your upgrade, such as project management, technical design and testing and training. Next, determine the types of resources required to plan and install this upgrade, and the timing, not just how long it will take, but if you can you take advantage of any special offers, promotions or discounts by acting quickly. Finally, consider the costs involved in your purchase, additional staff resources and other related expenses.
Step #5: Make decisions
Now you’re ready to decide. To implement or not to implement. If you have concluded that the upgrade is not absolutely urgent, you may want to weigh costs and efforts against benefits, consider viable alternatives and the risks involved in taking no action for now before deciding to move forward. If you have determined that the upgrade is critical to your success, then proceed with your planning and implementation efforts. If the costs of this upgrade are too high, then you may need to consider other alternatives such as implementing your upgrade in stages.
Follow the steps and determine if the time is right for your next technology upgrade. By behaving more like today’s Market Leaders, you will be better equipped to maximize your corporate performance through effective IT management.