The information revolution has altered the commercial equation and with it the relative profitability for many businesses. Many small businesses still struggle to harvest value from their computer expenditure.
The information revolution continues to roll on. Computer hardware prices are reported to have fallen by about 15% in the last quarter. Convergence continues apace with more and more data storage being carried about almost as personal jewellery. The white earpieces of I-Pods have become commonplace on trains and revamped the fortunes of Apple Computer. My telephone has a storage card which holds about 500 floppy disks worth of information. My digital camera used to carry about the same amount of storage. I stopped carrying a digital camera when the camera in my phone became a better camera than the digital camera that I have had for a few years. My mobile broadband card allows me to connect my laptop to the Internet in the back of a taxi on the way to the airport. And my office broadband provider is tempting nearby ADSL2 with dramatically faster internet connectivity.
In some industries, the adoption of effective information technology has revolutionized the business. The outstanding example is probably online banking. Having live accurate up-to-date information about our bank accounts available to us on the Internet, and the ability to manipulate those accounts by way of bank transfers and payments have dramatically diminished the popularity of the trip to the bank branch. The downstream effects of this have included the move by other businesses to stop handling cash. Many real estate agents now do not accept the rental payments in cash over-the-counter. In turn, this is improved their bottom line by reducing risk and staff time spent in cash handling. Other examples include the purchase of domestic air tickets, taxation, movie house tickets, and the list goes on and on.
Despite all this, many businesses still struggle with fundamental problems associated with their computers that stop them getting value from their systems and spending more money is not the answer.
You can buy a scalpel for a $4.95, but it doesn't make you a brain surgeon.
Getting the basics right in business computing is essential and this does not mean buying new faster or better computers. Getting the basics right includes ensuring the security of your business data. Your systems must be working and available, and this means controlling virus and spy-ware attacks. Computers must be connected to the outside world for e-mail, online making, and a multitude of other business essentials.
Those businesses which have more than about 50 computers have got the basics pretty well right courtesy of either outsourced IT support staff or in larger firms full-time by IT departments. Despite the occasional high-profile business security disaster like the recent credit card security theft, most larger businesses get pretty good value from their computers. It is almost inconceivable to think of a bank saying that they had lost their customer data, or for an airline to have its web site not working for a few days.
However for the 96% of Australian businesses which are described as small and medium business, the value-for-money story in business computing is very different. Stories abound of data security disasters in small business. One real estate business had a problem with their server and was unable to use their computers for six days while the problem was fixed by their consultant. For those six days, no transactions could be recorded for the thousand odd rental properties that were managed by the agency, no listings for properties for sale were able to be advertised on the Web and no contracts for properties sold were able to be processed. In another case, a full year's worth of medical laboratory findings disappeared when a hard drive in a server catastrophically failed and it was then discovered that the backups which have been done every day, had not been working for some months. Fortunately, a forensic data recovery service was able to reconstruct all the data on the hard drive. The recovery happened over a period of about a month and at great expense. The stories are common. In another case, a law firm discovered that there backup tape machine had never actually been plugged into their server and so for a full year, a blank tape had been put into the machine every afternoon and every morning that same still blank tape had been taken off site and put in a bank vault for safe keeping. Fortunately, the problem was discovered in during an IT audit and not during an IT disaster.
Part of the secret of the success of large business and computing is based on the economy of scale the large business is able to get the network management and of their computers. Probably a more significant secret for them is the way in which large businesses account for their computer costs. If a business accounts for its computer costs so as to identify the total cost of ownership of the computer system, it is able to compare and contrast various proposals and quotations for the supply and maintenance of the computer system at their real total cost. If the business manager tells me that his computers cost $2000 each or some similar figure, then I am certain that he is not considering the total cost of ownership but rather the purchase price of the hardware and perhaps the software and perhaps the initial configuration. These expenses are only the tip of the iceberg in computing. Additional costs such as ongoing maintenance, virus removal, Internet access, staff downtime, consultancy services, and the costs of tender evaluation and, eventually, of disposal also need to be added into the total cost of ownership equation.
No one buys a new car and expected to run for the next four years without maintenance and servicing. Some firms use fleet management so that someone else manages the total cost of ownership of the vehicle. Others recognise there will be ongoing costs and pay them as they arise. Some of the costs will be from preventative maintenance and servicing and some from consumables like petrol. Generally, the costs of scheduled maintenance will avoid the much higher costs of emergency repairs. A hundred years of motor car ownership in business has taught us well.
Computer systems may not have been in your business for a hundred years but the lesson is much the same. There are ongoing costs to having an efficient business computing system. Just like motor cars, computers need consumables, preventative maintenance and sometimes emergency repairs. Unlike cars, you probably also need to teach your staff how to drive your computers. Training should also be considered in the total cost of ownership equation.
For many businesses, having a spare would make sense not only for car tires but also for office computing. Commonly called “redundancy”, having a spare server or PC on standby might make very good financial sense if it means avoiding five or six days of downtime for your staff.
The cost of producing a unit of computer work, say a typed letter or an invoice is dramatically lower in large business than for small business.
Managing this ratio of computer output and the total cost of ownership is an important key to business success is now and will be a critical key in the future.