IT spending – Cooper Mann Consulting

June 24, 2014November 29, 2017

Justifying the IT Budget: the Cost of Not Spending

“Competitive and ever-increasingly sophisticated in the marketplace”[1] describes a company positioned for long term business survival. Complacency takes the business nowhere but into irrelevance-land, which I think we can all agree is not where most business owners wish to end up… it makes selling the company slightly more challenging. Even in markets which were once firmly held to be localized are now open to new – and new kinds of – competitors, due in most part to advancements the development of information technology (IT) as well as how it is applied. These days, competition is globally facilitated rather than locally, and it’s becoming the standard approach. Welcome to the cloud.

New paradigms in IT capability and use are spawning huge shifts in what were broadly recognized normal or traditional business approaches. This realization has created the need for businesses to radically change their view of IT investment and the value of IT within the organization and operation. Yet IT is rarely an area which gains a strategic focus for investment within most businesses, and is frequently considered to be like a pencil or a particular chair… something the business needs but which has little impact on the company’s ability to compete better. Au Contraire, Mon Frère: Information technology is at the heart of business competitiveness, but justifying the desired investment is the great challenge. Maybe it’s because the focus is always on the great benefits to be achieved with the spend, rather than looking realistically at the impact of not doing it well or at all. Especially with information technology, there is a large potential cost to be paid for not spending adequately.

While business operations are sustained through IT involvement, economic pressures continue to weigh down business interest in funding IT operations. (which is weird, as there is a lot of evidence that the good bet is on those who do just the opposite). This regular spending reduction and cost control plan has good intentions of reducing the overall cost of business operations. The unfortunate reality is that operations are less efficiently sustained and are even more frequently unable to create or manage any level of growth. Reducing all IT spending is only useful when profitability is also improved and quality is maintained, unless it is an effort to simply stay afloat as revenues decline (and it’s recognized that quality will decline as well). But reducing costs does not help the business seeking to remain competitive in a rapidly changing marketplace, and pulling the pins out of the department primarily responsible for at least keeping things currently in operation operating serves only to chip away at the once-solid foundation. It’s a real problem, this difficulty with increasing interest and justifying increased funding for business information technology. And it all stems from the inability of organizations to clearly and with tangible benefit cost justify the investment.

It is this justification – demonstrating IT investment as a strategic asset presenting an advantage over competitors and positioning the business for future success – which requires effort and analysis to fully describe. Information technology is not a set of servers and software, and it is not websites and portals. It’s not click thru rates or SEO scores. Well, it’s all of that, but it is none of that. There is so much to consider and incorporate, and there are many degrees of success which might be experienced along the way. Information technology is a fundamental requirement in each and every business, and dependency upon it is increasing at a startlingly rapid pace, yet we still can’t quite figure out how to put it all on paper with provable numbers.

It might be easier to forecast in little departmental or functional pieces, but that doesn’t provide a total picture of the enterprise. And it’s often really difficult to quantify the impact of not doing something, or doing it only OK rather than really well. When this data does present itself, it often comes too late and in the form of a comparison to the competition, revealing where the business just didn’t meet the mark as compared to others in the same space.

It all boils down to businesses coming to the realization that information technology investment must be made on a continuing basis. The justification for IT funding must be made, and that justification must necessarily be balanced against the potential implications and impacts of not implementing. This is the only formula which can ultimately describe the value of IT investment in the business.

Make Sense?

Read the entire article on LinkedIn

https://www.linkedin.com/today/post/article/20140624161243-633314-justifying-the-it-budget-the-cost-of-not-spending

[1] A model for investment justification in information

technology projects: A. Gunasekaran et al. / International Journal of Information Management 21 (2001) 349–364

January 28, 2014

Why Accounting in the Cloud?

Business owners and managers need to keep close control of their financial data. They need to know where they stand at all times, and having information available to make business decisions is essential. When the financial information is in the office but the owner isn’t, how can wise decisions be made without access to supporting data? They can’t, and that’s a problem. The solution is simple: work in the cloud.

A cloud computing model properly applied to accounting and bookkeeping systems helps businesses of any size keep their financial data and accounting applications in a safe a secure environment, yet accessible to those who need it. By locating the business applications and data in a protected central location, access to programs and data sets can be provided to authorized users regardless of location or computing platform. For a small business owner, this means that working from home or on vacation can be as productive as working in the office. In larger businesses, cloud-based accounting means the accounting department, CFO and financial advisers might all access the same financial records and applications no matter where they work from.

Cloud computing and hosted application models applied to accounting and bookkeeping represent a viable option for managing, securing and providing access to critical financial information. Businesses outsourcing their accounting or bookkeeping work find that cloud based approaches offer workflow and process efficiencies to help get the necessary information in the hands of those who need it, quickly and efficiently.

Keeping accounting and bookkeeping systems safe yet available, providing business decision makers with the flexibility of accessing their financial data from anywhere and at any time is a highly valuable service. Accounting and finance professionals can act as the trusted adviser to their clients, providing important business insight and information, with guidance in developing cloud computing and online accounting approaches being among the benefits the firm offers. Working closer with clients allows professionals to produce better, more accurate and insightful results. Cloud computing models remove distance barriers and allow professionals and their clients to work more collaboratively with applications and data than ever before.

Many firms are just recently discovering the relationship between technology adoption and business competitiveness. Those that embrace new computing paradigms gain the ability to meet client requirements in innovative, efficient and timely ways while those that do not adopt these new models continue to struggle, unable to communicate value and differentiation in their service offerings.

There are some recognized truths in business, and one is that is isn’t what you know but who you know. Another truth, an understanding that is just now being fully recognized, is that it’s not what you do, but how you do it that matters. Accounting and bookkeeping for business is absolutely an area where cloud computing and the wise application of technology and service can improve cost efficiency, accuracy and turnaround times, allowing the firm to provide a higher level of service to clients. Accounting in the cloud is a technology-enabled approach which propels the firm into an entirely new range of capabilities and potential service offerings, reaching higher levels of performance and profitability.

Joanie Mann Bunny Feet Make Sense?

January 21, 2014November 10, 2017

Efficiency and Value with Cloud Accounting

For some accounting professionals, the problem is finding a way to provide services that are valuable to the client, and doing it in a way that makes it profitable for the provider. Outsourced and online accounting models are the answer, employing innovative tools in the practice and with clients: tools and resources necessary to get more informed and run the business better.

accountingCloud

With online accounting solutions the firm is able to increase profitability with the range of services offered, often adding clients and work without hiring more personnel. Online solutions allow professionals and their clients to work from anywhere at any time, providing both with the freedom to focus on core business capabilities (and lifestyle).

Reducing the requirement for sophisticated on-premises technology may mean providing everyone with the ease of use and security of server-based computing models, which is among the benefits of a cloud IT approach. Centralizing and managing applications, protecting valuable data resources, and streamlining business processes are among the benefits to be achieved with an outsourced, managed application hosting solution. Businesses who outsource their IT management often realize an increased capacity to do business simply by leveraging the cloud to make the current working models more efficient and effective.

Leveraging mobility and real time access is also about increasing the overall range of opportunity to deliver value. Contractors, employees and clients all find improvements in getting the information they need when it matters, and the firm finds a greater agility in meeting client demands and expanding service offerings.

Cloud computing and online accounting solutions have proven the viability of anytime, anywhere working models, and professional accounting practices of all sizes and orientations are realizing the benefits of working closer with their clients by applying them to the engagement.

Cloud accounting is really about improving the profitability of the accounting practice while delivering higher levels of service to the client. The movement of information from one place to another; translating data from one form to another – these are the processes representing the cost and inefficiency in the practice, and are specific areas where a collaborative, online approach may introduce new service efficiency and value.

jmbunnyfeet

Make Sense?

It is worth noting that “cloud accounting” and online accounting models do not necessarily require the use of a SaaS solution. QuickBooks Online, Xero, Freshbooks – these are new small business offerings that exist purely on the web. QuickBooks desktop editions can be “cloudy”, too, when they’re hosted by an authorized QuickBooks hosting provider. The point is not necessarily to use web software, but to approach IT management and systems from an outsourced perspective, allowing for centralized management and administration and delivering secure remote and mobile access. The systems should facilitate the working model, not force it.

January 14, 2014

The Productivity Paradox: Accounting for Returns on IT Investments

There has always been somewhat of a struggle between the IT department and “management”, much of the difficulty existing with the need to demonstrate clear returns on investments for IT purchases. Unfortunately, expenditures in information technology are often the result of short-term views of long-standing problems, applying “solutions” that do not fully address the requirement or which do not deliver the productivity or performance gains expected, particularly in a dynamic and rapidly changing business environment. The assumption is that a wise investment in information technology will result with improved profitability and performance. Demonstrating this on paper is not always easily accomplished.

There is a great deal of research on the subject of accounting for returns on IT investments. Some of this research describes “The Productivity Paradox”, referring to early studies on the “relationship between information technology and productivity, and finding an absence of a positive relationship between spending on IT and productivity or profitability”. [1] Previous to the emergence of cloud computing and widely available remote and mobile technologies (and now possibly even more with the prevalence of available options), businesses invest heavily in IT infrastructure and applications which deliver nominal benefit to the business when measured against the cost of acquisition and implementation. Heavy IT investments are made with little or no measurable benefit to profitability, even if operational performance improvements are created. In many cases, the difficulty in “proving” benefit from information technology investments rests with the lack of information relating to impacts in non-operational areas, such as with investors, auditors or analysts.

The early research has become a foundation for making the argument that accounting professionals should be more directly involved in determining the value and impacts of IT investments – due largely to the fact that accounting professionals are generally familiar with the variety of formulas and approaches which become relevant in measuring the effects of IT purchases. Information technology spending will result in short-term impacts, but will impress on the business over the longer view as well. With a foundation in accounting principles, valuation and analysis, and accompanied by IT knowledge and experience, management accounting benefits from an improved ability to recognize the relevance and value in IT implementations even where no direct profit improvement is visible.

Can difference in firm performance be explained by differences in IT investments? — Can differences in firm performance be explained by differences in IT investments?

Emerging technology models are having huge impacts in business capability as well as risk, and this new paradigm requires that accounting professionals apply their skills to understanding more fully the influences from and results of IT spending in the enterprise.

Having a basis for studying valuation and recognizing the good and bad of focusing on various key measurements (return on assets vs equity vs sales vs investment…) is essential in developing a “formula” for predicting impacts of and potential returns from IT spending, and solving the puzzle that is the productivity paradox.

jmbunnyfeet Make Sense?

[1] Journal of Information Systems Vol. 16; “Returns on Investments in Information Technology: a Research Synthesis”