Spend more on IT to secure efficiencies?

Spend more on IT to secure efficiencies?

Prime minister John Key recently commented that government departments need to spend more on technology to gain efficiencies. Is this sound advice during a slow economy?

At a recent Wellington Chamber of Commerce breakfast, prime minister John Key commented that government departments need to spend more on technology to gain efficiencies. So what did he mean by this? And is this an investment all business owners should be considering at a time when efficiencies are most needed?

The answer lies in going through a business process analysis exploring the following key issues:

• What are the key processes in the business?

• How are they being done?

• Are there ways that parts of these processes can be streamlined or automated?

• What is your industry doing in offshore markets? What technologies are they using?

• What technologies are available in New Zealand that can provide the same efficiencies?

• What is the payback figure on this investment and does it fit your budget?

Often the 'IT spend' is seen purely as a necessary expense that provides tools for employees, rather than a business investment. I strongly disagree. The amount you spend on technology should be targeted, specific and have direct and clear intent – including the financial payback for specific product or service sets. The best operators do this.

View the business itself as the product and focus your attention on key areas that make the business a complete offering - or are currently failing to do so. Then ask what you can do to improve the product itself. In viewing the business as the end product, I believe the value of the product will always be in the systems - thus excellent systems generally create excellent businesses. Your technology spend therefore needs to be bound to the core drivers within the business itself, not as some annoying expense which sits in your P&L and makes you scratch your head.

If you are able to isolate processes to their core within your staff base, then ask which of these can be ‘outsourced’ to technology, which need to remain in human hands and of those, which can be partly automated. Then consider which parts you can link and flow.

There is very little in a business process that cannot be automated these days. I actually believe within my lifetime, the only core difference for like businesses will get stripped completely down to the human element, but that is some years away.

While I am in no way suggesting the human element is not important right now, I passionately believe, and can illustrate through businesses I have worked with, that those with good internal systems are generally more profitable, settled and have better workplaces for both staff and owners. But above all, they understand the benefit of technology to the business and the need to spend money on it.

Money needs to be apportioned in your technology spend to any of three key areas:

1. Increase your ability to touch your client base more effectively, in speed or quality of information supplied

2. Increase the cycle time of your staff to make decisions.

3. Increase the productivity or overall volume of business able to be conducted

Anything else will result in wasted expenditure. However, if you can link these three rules with the orientation toward process isolation, you will quickly see areas for technological advance and where expenditure will be warranted.

As an example, most businesses are rapidly moving toward, or already achieving, paperless environments. With the advent of clever document management across various application sets, it is fair to assume that very little administration muscle power will be needed in the future, as long the internal structures are set up to handle this flow of electronic information effectively. Massive efficiencies will be gained in a number of areas such as physical file searches.

So, in my opinion, John Key was trying to say was: ‘get your hands a bit dirty and work out your core processes, figure out which ones can be improved by technology, understand and compile the cost case… and if it stacks up… spend the money and back your decision’.

Challenge yourself to consider what processes in your business you can isolate; then which parts you can outsource to technology. Which of these can show a clear cost-case benefit? If you don’t grasp what I am outlining above, find someone that does! And give it a go. It will change the way your business works for the better.

Patrick Kershaw is a business partner with Horizon Pacific, a nationwide technology support provider specialising in assisting SMEs with technology requirements. He can be reached at

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