October 11, 2011 6:30 AM

There has been an abundance of gloom and doom expressed in the media since the “great recession of 2008”. The markets seem to have been irreversibly shaken and the image of the global economy irreparably tarnished. It is in these uncertain times that decision makers begin to make several grievous mistakes. In this post we will address the importance of not losing sight of what is important to business success, regardless of the state of the economy, particularly from an IT investment perspective.

Investing in the Future
When the economy is booming and businesses are faring well, decisions makers face reduced pressure when making investment decisions for the future of the business. A common mistake, however, is to fail to make these investments when the market is less optimistic. The idea is simple: in a booming economy, success is enjoyed by many companies. Some fare better than others, but money is exchanging many hands. A bleak economic outlook, on the other hand, increases competition for customers. Businesses and consumers alike become hesitant to spend money with an uncertain future so unless your strategy is to fade away into oblivion, you will need to fight for your market share.

In order to dampen the effects of a downturn in the economy, activities such as sales and marketing and strategic business investments should be increased or maintained – not reduced. Reducing these activities in a depressed economy will further increase the impact of the recession and collectively can cause a downward spiral in the market. There is certainly something to be said about careful spending – cash flow, for example, can easily make or break a business in a poor economy. However, failing to continue business investment in these situations assumes that there will be no break from the downturn in the economy, a particularly pessimistic viewpoint. Take advantage of low prices, interest rates and reduced business chaos¹ to make investments for the future.

Investing in IT
Common cost cutting methods that businesses employ include: lay-offs, reduced marketing efforts and reduced investment – particularly in IT areas such as software. However, putting off investment in a proper business software system is a mistake. A proper system can improve your business in the worst, or best, of times. It may seem counterintuitive at first, but spending money on IT can be one of the best cost-cutting methods available to managers.

Firstly, there are the direct cost savings by requiring a smaller headcount to run an automated business. Tasks that employees may have spent many hours working on previously, may be reduced significantly or eliminated altogether. Take sending invoices for example. Many sophisticated ERP software systems automate this process by automatically creating and sending hundreds of invoices a day.

Secondly, there are the secondary cost savings enjoyed by having a more efficient organization overall. This is accomplished by reducing inefficiencies and errors that frequently occur with manual processes. IT investment reduces the occurrence of human error, greatly improving efficiency and reducing costly errors. For example, consider an online retailer that sells pet products. If a customer visits their site to place an order for dog collars, they will be very disappointed to find out that the product is unavailable after already placing the order because the company was not aware of their exact inventory level. Proper inventory and accounting software can eliminate this scenario.

Finally, businesses can benefit from their improved ability to deliver to customer requirements. It is always an effective strategy to try and satisfy customers as thoroughly as possible. Limitations exist with the sophistication of IT systems in place and/or the number of staff employed. IT investment will allow businesses to increase the level of personalization and customization available to their customers.

The Growing Importance of IT
In the past, it was seen as a strategic move to invest in IT, whereas in today’s business environment it is necessary just to keep up. Even small businesses may have customers located across the globe generating the need for sophisticated technology at even the smallest levels of business. eCommerce, as an example, continues to grow significantly year after year. Those that bring their business online benefit from increased sales that continue to grow. To provide some perspective, online retail sales have grew by 12.6% during 2010 in the US compared to overall GDP growth of only 1.3%. These statistics point out the opportunity that exists for growth and success with proper IT investment.

Being proactive in a market where others are becoming radically reactive will serve to set you apart from the competition. Making business decisions purely on economic outlook is never a good idea as failing to invest in the future of business can be harmful or fatal. Those that choose not to invest in technology not only fail to prepare for the future, but often fail to adapt to the present.

Blogger Profile: David Michaelangelo Silva
David, a Sales & Marketing specialist within the IT industry, is a passionate writer about all things technology. David’s current role has him blogging about the ERP software industry for Blue Link Associates, an inventory management and accounting ERP software provider.

Posted by Sue Ansell at October 11, 2011 6:30 AM

Categories: Economic development Canada Enterprise Resource Planning (ERP)

Comments

TrackBack Link