The Silent Killer: Under-Investing in Technology

I recently worked with an IT professional services firm that was coming to the end of an impressive growth stage.  After being in business since 1991 and experiencing flat revenues for nearly 10 years, the company had managed to increase its annual revenue by a factor of five between 2001 and 2006.  When ownership noticed that 2007 revenues were not reflecting the previous growth trend, the company called in an IT consultant to do an end-to-end technology analysis.  After a two-week audit, the IT consultant made the following discoveries:

1) The Accounting Department was relying on a shrink-wrapped, off-the-shelf, ‘electronic checkbook’ software package to manage tens of millions of dollars in revenue and expenses—as well as transactions with a reseller and partner network consisting of nearly 100 organizations.

2) The Customer Service and Customer Support departments were keeping account-level customer notes and files in MS Excel files on their desktops.

3) In order to send the monthly customer and partner newsletter, the Marketing Department had to manually merge and dedupe information from 16 different databases.

4) There was no way to access the company’s network or shared company drives from outside the physical office location.

5) Unless employees chose to do so on their own, no archiving or backing up of emails and other sensitive information was taking place.

As a result of the above, the IT consultant correctly concluded that company growth had slowed not because of a change in the marketplace, but due to an extreme lack of efficiency.  Financial-related decisions were being made slowly or not at all (it took the Accounting Department nearly 30 days to reconcile the previous month’s financials) and customers were becoming frustrated at having to repeat themselves each time they spoke with a different customer service representative.  In addition, sales opportunities were being missed, remote employees were on an island until they returned to the office, and office-wide hunts for historical files were becoming a daily occurrence.  Two months later the company was knee-deep in the implementation of multiple technology systems, including (but not limited to) a new CRM and a new enterprise Accounting package.

In addition to the cost of the direct cash outlays, having to undertake multiple technology implementations at the same time predictibly brought a significant portion of the company to its knees for nearly a quarter. Although it is still too early to publish the results of the technology upgrades, it is safe to say that the software license fees, hardware upgrades, consulting fees and lost productivity during implementation will add up to 10% or more of the company’s annual revenue—for two systems that should have been in place years ago.

The moral of this story is simple: if you are too busy making money to proactively invest in efficiency-based technology, you will eventually find yourself reluctantly investing in it when you are NOT making money.  To expand on this topic, I have written a free, downloadable checklist called “10 Signs a Lack of Technology is Hurting Your Business.”  Feel free to download it when you have a chance.

Also, for some addition reading on this topic please check out How to Start a Company Without an IT Guy, a very funny blog posting on Inc. Magazine’s Technology Blog.

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