The recent threat of a recession is forcing many accountants to review their budgets for the coming year. High on the list of questions is whether future IT investment is set at the right level.
In recent months the IT industry, particularly in the USA, has seen a serious downturn in business levels. Will this be reflected in Europe and if so, are we right to reduce out outgoings in this area?
The research work currently emerging suggests that the focus for new IT projects is on ways of increasing the revenue stream from existing and new clients.
E-business tools can help deliver this in many ways – not least in the area of business intelligence where better customer information can really help develop incremental sales.
I think few would doubt that ongoing investment in this area is valuable as long as you can get a reasonably quick payback.
When it comes to IT projects to reduce costs the research material suggests a much greater level of caution.
This is somewhat surprising as you might expect that this is the first area an accountant would look at. There are a number of reasons why this might be the case.
Firstly, many of us have been bitten by IT cost-reduction projects, which have failed to deliver what has been promised – the implementation of ERP systems being a good example. This could help to explain the concern about repeat expenditure.
Secondly, it may be that there is a lack of appreciation, particularly at main board level, of the extent to which technology can drive costs out of organisations.
The majority of UK organisations are still rekeying information many times, for example in the purchasing function.
E-business technology has moved on a pace and can offer seamless integration via the web for processes that involve customers/suppliers/employees and other external partners.
Oracle, one of the world’s largest technology companies, has been pushing the message hard that huge savings can be made if e-business technology is embraced. It claims it has reduced its annual overheads by 10% ($1bn) at the same time as improving customer service.
So perhaps cost reduction should stay on the agenda for IT project spend despite the natural caution many express. The good news is that there are many opportunities for tactical expenditure, which can deliver quick wins.
However, it is likely that there will need to be an intensive education program at board level downwards on what e-business can really offer.
This will hopefully put the accountant back in the hotseat again for controlling costs.
John Tate is chairman of e-business consultancy Tate Bramald. ?:
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