August 15, 2014
Business owners (me included) tend to expect that the capital investments we make in our businesses will last 10, 15, or even 20 years (think office furniture). Whenever we decide that it’s time to make a significant cap-ex purchase, we spend lots of time evaluating options, considering financing, and planning for the new infrastructure so we can take maximum advantage of the money that is spent. This is easy when the business is purchasing a warehouse or a delivery truck, because the investment is generally put to work immediately, and the ROI (return on investment) is clear and easy to calculate.
Perhaps this is why so many business owners loathe spending capital on technology. First, the capital asset is not really all that tangible (we are spending $60,000 on a SAN – huh?). Second, in many cases, it takes 6 months (or longer) to put the asset into production. Third, and probably the most frustrating, often there is no clear way to measure the ROI because the asset has no direct relationship to revenue or profit for the business. How do you measure “customer satisfaction” or “employee productivity” in financial terms?
Regardless of the emotional barriers to investing in IT, there is perhaps no better investment that a growing business can make than re-engineering its IT infrastructure.
What are the normal “growing pains” of a business?
A business that starts as a small entrepreneurial venture and ultimately grows into a corporation must completely re-engineer its business processes and structure 5 times. Why? Because all businesses produce and rely on large volumes of information, i.e. financial records, customer communication, sales and pipeline data, human resource data, regulatory requirements, etc. This mass of data is way too difficult to organize and keep track of, let alone use effectively without the right IT systems. Small businesses may only have 1 or 2 people that generate and need specific categories of data. But as the business grows, larger groups of employees need to collaborate and share functions and information so that everyone is effectively working together. Anyone who has played a key role in a rapidly growing business knows that this specific problem drives the re-engineering of internal processes, corporate structure, and financial management of the business. In B2B (business to business) ventures, the size of the customer tends to follow the size of the business. Larger customers want to see a level of organization and sophistication in their vendors and partners that reduces the anxiety of dependence.
Regardless of whether the business is a product or service business (it could be argued that every business is both), two of the best ways to drive improvements and convince larger customers you can be relied on to deliver is implementing standardized processes and quality control systems. Both require additional IT infrastructure and a much higher degree of technology integration into the business.
Consistently, companies that have made this investment in acquiring, integrating, and maintaining their IT infrastructure grow faster, operate with less human labor, out-compete for their less technically savvy counterparts, and ultimately increase share value at a much faster rate.
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