Do IT right now
Although there is a natural tendency to put IT investments and initiatives on the back-burner during financially tough times, Satish Pendse, HCC’s CIO, explains why this is actually the right time to invest in IT.
T he world is passing through one of the most challenging times and Indian construction and real estate businesses too have been affected. The confidence has taken a beating resulting into demand drying out for real estate. (Of course, now there are some signs of revival). Money appears to have dried out. Lenders have become extremely conservative. Businesses having foreign currency investments too have been suffering due to rupee depreciation.
As a response, many organisations have scaled down their expansion plans and most of the investments are put on the back-burner. Investments in information technolgy (IT) can be termed as “discretionary”, since they are not mandatory for keeping the business running under tough times. Hence the natural tendency is to put the IT investments and IT initiatives on the back-burner.
The election outcome has definitely helped to alter the confidence positively. Although its actual impact on the business may take some more time, it’s now expected that India will resume its rapid growth path, sooner than the rest of the world. Let’s analyse the scenario from IT investments perspective.
What do IT investments deliver?
The bare minimum benefits of IT investments such as speed, connectivity, internet exposure etc. are now given and they have become part of the business. The other strategic benefits of IT investments can be summarised as follows:
Visibility: The businesses have rapidly grown in size and complexity. Without IT, it’s no longer possible to have a complete picture of a large and geographically spread business. IT tools such as SAP kind of ERP work on a single database across locations, across departments, giving us an end-to-end visibility of the business.
Control: When the organisations were small, the owners, the MDs, the top managements could exercise personal control. With the growth, it’s no-longer possible to exercise the personalised control. IT tools have provision to build controls within the application and track any deviation.
Customer acquisition and retention: Integrated software such as CRM and ERP help to track all the contacts with the customers, maintain the customer-wise records and assist in better servicing of the customer.
Real estate developers can use IT creatively to give pictorial views of the projects, its progress, etc. This can be made available at various customer touch-points including websites. Rich customer experience results into better acquisition and retention of the customers.
Reduction of costs/cycle-time and improve efficiency: This is the key benefit of IT investments. Using IT appropriately can help avoid duplication and considerably speed-up the business process and help to reduce the wastage. It takes over the routine and low value added manual tasks and performs them more efficiently.
Backbone to sustain business growth: The way infrastructure like roads, ports, airports help to sustain the growth of the country; in the same way an IT backbone helps to sustain the growth of the business. It helps to build strong, rugged and efficient business processes which are necessary to sustain the growth and make it less person dependant.
Provide competitive advantage: Use of IT in a more innovative way and much ahead of the competition gives an organisation a competitive advantage.
Our industry has already realised the power of IT and organisations are taking concrete steps in that direction.
Quantum of IT investments
The biggest issue when it comes to investing in IT is the incorrect perpection that it is very expensive. Contrary to this popular(?) perception, investment in IT as a percentage of turnover is not very high. Well. it’s very difficult to generalise but some thumb rules can be put forth. Total annual IT costs (after considering the depreciation of IT capital investments, salaries of IT people etc.) at 2% of the turnover is considered a good amount.
The amount is not high, compared to the value that it can deliver to your business. In fact, it can give you that much-needed competitive edge in the market. What one needs is the strong conviction and good implementation to convert these investments into the value to your business.
Why invest now?
It’s recommended that businesses with growth agenda should continue to invest in IT. Following is the rationale for the same:
IT is a tool to win during the current turbulent times: Current times require us to be lean-n-mean in managing our operations in a cost effective manner. IT will enable you to do exactly that.
During current turbulent times, one should go for those IT investments that deliver quick value. For example, in the last article we discussed about a software that optimises the use of reinforcement steel. This is low cost software and has very quick pay-back period.
Even the world class software such as SAP can deliver quick results if you implement it through an appropriate partner who facilitates you to treat it like a business tool.
Use this time to prepare for rapid growth: It now appears that resumption of rapid growth phase is round the corner! We should use this somewhat lean period to prepare ourselves for the high growth phase.
Establishing a good IT backbone will be an excellent investment for the same. During that period, we may not have as much time and mindshare for IT since we will have challenge to grow in line with the external environment. We should therefore build IT backbone now.
Better utilisation of your human resources: Your excellent team of people, which is your most critical asset, may not be getting adequately leveraged during current times. Use that team to set-up your fundamental IT systems which will yield high dividends in future.
Best bargain available: Currently the IT business is low across the globe. This has affected many IT organisations in India. There is less IT business being chased by more IT organisations.
You are therefore operating in a buyers’ market as far as IT products and services are concerned. You will get best of the possible prices and best of the possible people to do your IT jobs. Make the most of IT.
In a nutshell, it’s advisable to be a smart long-term player and use this time to strengthen your IT back-bone which will facilitate your high growth which is expected sooner.
The author can be reached at email@example.com.