When developing IT strategy for a company (if such an activity even occurs), small businesses often do not understand the true impact of technology on their bottom lines. If this is the case, IT may remain a cost and a potential drag on the business. Following are some ways to transform IT into a profit center.
- Keep the end in mind - when thinking about current IT pains - slow systems, expensive break/fix work, time to recover from power failures and the like, map the impact of these problems to profit. How many more customers could the business serve with faster systems? How much profit would this generate? How much less could be spent on fixing down systems with proactive maintenance? How much of this savings would drop to net earnings? By thinking in terms of results to the business, it becomes easier to prioritize those IT initiatives that actually drive profit in the business.
- Recognize inertia - it is emotionally easier to continue to operate in the way that things have always been done. At first glance, IT may not be the biggest priority when thinking about what is most important to the business. Things like sales, marketing, customer support and the like typically are top of mind. The problem with this, is that that there are often hidden costs associated with inefficient IT. Are existing employees spending part of their time on IT support issues? What is the opportunity cost of this? What could they be doing to drive sales and profit for the business if they did not have this burden?
- Assess current IT costs - When I ask small business owners and leaders what their IT budgets are, they often do not know. Some of this is due to the fact that there tends to be less formal budgeting processes in small businesses. Another reason is that IT costs often grow organically, rather than through a thought out process. It can be eye opening to add up the costs of current vendors, capital costs, operating costs, salary costs and the like. Creating a budget out of this is the first step to ensuring that these costs are driving maximum value and to reducing costs, where possible.
- Core competency - there are many capable small business owners who have employees who perform their own IT support and those who do are often attracted to the technology and proud of their accomplishments. This is a good thing, but at what cost? An IT managed services provider with hundreds of customers and years of experience develops standard operating procedures and metrics for managing most aspect of IT support. When taking on IT tasks internally, one has to ask if the benefit of doing it in-house outweighs the natural scale disadvantage that one has as compared to a professional IT support organization. If a function is not a core competency for a business, it is a legitimate candidate for outsourcing in order to maintain strategic focus.
- Identify opportunities - another great way to turn IT from a cost center into a profit center is to forget about IT altogether and dream up ways in which the business could perform better. If there were a way to market better to customers, to make salespeople more productive on the road or to reduce the time it takes to ramp up new employees, what impact would this have on the business. There may be technology solutions that can turn these dreams into reality. This is the bookend to reducing IT pains and an achievable approach to getting more value out of technology.
How does IT drive profit at your company?
Key Takeaways:
- Mapping IT pains to profit enables quick prioritization and pruning of IT initiatives
- Money may be left on the table if there is no IT budget and a business as usual approach
- Focusing on opportunities that IT can bring to drive core competencies may have a material impact on both cost reduction and profit increase
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