Medium-sized companies, according to the expert panel at Information Age’s IT for the M Business conference, are becoming much more savvy at exploiting technology to improve profitability and grasp business opportunities. But if there was no one thing disputed, it was that there are many more lessons to absorb on the way IT is applied and managed.
Nigel Montgomery, an analyst with IT adviser AMR Research, characterises the mid-sized business’s relationship with technology as being stuck between two extremes. While small businesses can make do with packaged software and large enterprises typically have plenty of resources to build custom technology, mid-sized businesses often lack the time and the money to source the kind of innovative technology that will deliver competitive advantage.
“They can’t afford to go to the big consultancies, so the challenge for mid-sized companies is finding the right people with the right experience,” says Montgomery.
That does not mean just technically minded people, adds management consultant Graham Keen of GK Partnership. “People such as the CEO or the CFO, who are taking business decisions that have an impact on the bottom line, are interested in hearing the business case for IT projects, not the technical case. So the IT department must have the resources to put together compelling business cases,” he says.
According to Vincent Bourne, infrastructure manager at GCap Media, the UK’s largest commercial radio broadcaster, this kind of profit focus eludes the IT departments of many mid-sized organisations, because IT management is too often picked for its technical rather than business acumen. “Management in IT is not selected on the basis of leadership skills,” he says. “The question should not be whether a person is a capable technologist, but whether he or she is fit for management.”
AMR’s Montgomery believes that if IT departments have lost sight of their role in driving profitability, then the relationships they keep with their suppliers represent part of the problem.
“Vendors do not sell business profitability to their customers, they sell products,” he told delegates. “If companies change the model of engagement with their suppliers to include more shared responsibility for the success of each project then both parties would make more money.”
Is Outsourcing a viable route for M businesses?
When asked whether outsourcing is a viable technology strategy for most M businesses, the panel’s response was mixed. GCap’s Bourne reported that he has operated a 2,000-user email system within his company for the past two years. It has only “wobbled” once in that time. “Why would I pay someone to do [email] for me?” he asked.
Montgomery was more in favour of mid-sized businesses exploiting outsourced services. “Payroll has, by and large, been outsourced by everybody,” he said. “Why can’t we outsource finance altogether?”
But to take advantage of such third-party arrangements, organisations need to have reached a certain size. Keen suggested that many medium businesses are not of sufficient size to outsource various functions. “If you don’t have the scale, the amount of resources that you need to effectively manage an outsourcing contract could mean that there is no net benefit,” he said.
“I agree that if something is not core to your business, then you must ask why you are doing it,” commented Mark Holland, managing partner at consultancy Baker Tilly. “Ten years ago, a lot of companies would have employed their own office cleaners. I doubt many of us do today.“
“But what is not core to one business might well be to another. Businesses need to find out what is ripe for outsourcing by identifying what is not core to the business – what is effectively a commodity.
