Monthly Archives: March 2016

The Peril Of IT Overinvestment – Is It Worth Considering?

We have all been victim, at some point or another, to that familiar ‘post-modernist’ urge to consume the ever newer, better, and more satisfying product in the marketplace.  We all understand (or almost all), that there is a great deal of manipulation that goes into the making of the perfect consumer – from birth onwards – and that this effort is usually repaid by a lifetime of shopping loyalty.

Businesses are not exempt from this cycle of consumption, and consequently, this cycle of aggrandizement. How do we, as consumers (or as businesses), insulate ourselves from this potentially insidious outcome?

The answer is not simple. Why? Because so much occurs at the subconscious level, where we are programmed to expect (or want) the best of all possible outcomes or solutions. If we are dealing with the simplest of issues – like choosing a new pair of shoes – then the answer is equally simple. If we are dealing with a more complex issue – like the purchase of a plane or enterprise software – then the answer is commensurately more complex. But what of those issues that lie somewhere in between?  For example, an SME that is looking to expand its IT profile to a level that is in step with the growth of its business? How best to approach this business decision that could potentially have long term and costly implications?

This is probably as good a time as any for us to collectively say – ASK QUESTIONS!

  1. Learn as much as possible about the product ahead of a vendor’s visit
  2. Attempt an estimate of the utility of the product to your business in the short and medium time frame (cost of initial investment vs. growth in productivity and potential ROI)
  3. Be aware of the pitfall of being oversold on a product

This final point is critical. Even when you have done your due diligence and know exactly what you want, you may not always find it. For example, in the software or services market, despite the wide selection, there are essentially two types of offerings: less than you need and more than you want. A third option is to buy a “package” and add “a la carte” options, which can quickly become very expensive. Also, “special offers” are a favorite entrapment – buy a pack of 4 pieces, even though you may only need 2 or 3. The price per piece may indeed be lower when you buy the pack, but now you have purchased additional product that you may never use.

What can you do to avoid being oversold too much and downright unnecessary product?

ASK QUESTIONS – as many as you can from all different contexts and perspectives!

Start by asking yourself, what can your business realistically afford? How much would this investment in IT contribute to the overall productivity of the company? Unfortunately, there appears to be a dearth of statistical evidence for SMEs on the productivity payoff of IT investment (Brynjolfsson, 1996).

When the time comes to sit down with a vendor, beware of sales pitches – we may be dealing with a more sophisticated product than a new pair of shoes, but the sales pitch is similar. “This is a good time to buy as prices have come down!”, “Your competition has this product! How will you remain viable?” or “It will make your business more productive and competitive”. All such claims, we know, are unsubstantiated by facts but are capable of influencing a decision that should be based on more concrete variables.

Finally, an investment in IT should not be the reason for overlooking the more ‘conventional’ strategies to reach desired objectives. According to a study by Brynjolfsson and Hitt (1996), SMEs that just invest in IT without adapting their organizational structures to make better use of existing resources, i.e. flattening their structures, empowering their workers and other related measures, could actually be worse off.

In conclusion, it is probably safe to say that the running of a business is a complex, multi-layered endeavor that deserves attention from many different perspectives. IT investment may be a powerful tool for the successful administration of a business but cannot replace or substitute the benefits of adapting a business to its present environment by ongoing organizational design and training (as examples). We strongly believe that businesses that attend to these vital areas will be in a position to enable IT to deliver the expected productivity increase to their bottom line.

Wikimedia Foundation Servers-8055 22.jpg
By VictorgrigasOwn work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=20348441