The myth: IT is an overhead with no competitive advantage

Myth: IT is an overhead with no competitive advantage

The reality: Smarter IT use does not just provide capability and enable innovation; it can help mid-sized enterprises to out-maneuver larger rivals.

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For several decades after technology entered the business world, it remained an outsider, separate from core business activities like operations, logistics, finance and marketing. In 2003, a writer for the Harvard Business Review famously described IT systems as “costs of doing business that must be paid by all but provide distinction to none”. But the past decade has proved this view wrong.

In the past 10 years, Netflix has made a triumphant move from DVDs to digital downloads, a dozen new web players have transformed airline bookings, and Uber has almost superseded the taxi business. Information technology (IT), it turns out, is far more than just an overhead; it can turn businesses and industries upside-down.

Yet as KPMG Enterprise Partner Brad Miller and Director Michael Alf point out, the business world is still adjusting to the idea that IT is more than just a necessary overhead. The pair have come to understand that many think it is costly, among many other myths, as they have helped mid-market companies embrace the new technologies.

IT was once treated as a necessary cost

Miller says the ‘IT-as–overhead perspective’ led many mid-sized enterprises to acquire systems with a view to running them for as long as possible. He says the mentality has been: “I'll bite the bullet, I'll implement some sort of system, I'll try to keep it alive as long as I possibly can, until either it's not supported anymore or something blows up, or it's too expensive to maintain.”

Alf notes that this has frequently been mirrored in org charts, so that a company “might have a general manager of IT, and they typically report into the CFO”. That, he says, tells him how business leaders react to information technology. “If they report to the CFO — and the CFO is mainly cost-driven — therefore IT becomes that kind of commodity play.”

IT must be seen as a growth opportunity

Now technology is far more than infrastructure. Instead, explains Miller, it’s a tool you leverage to drive business growth. Those who fail to take advantage of this are “missing out on a major source of innovation,” he says.

“Technology is the thing that's driving all innovation at the moment... A lot of these new pieces of technology are updating themselves every 6 months. There are new features, new functionality, new insights. So they're missing out on that.”

Mid-sized enterprises that fail to leverage technology lose out in two ways, Miller says. First, they lose the competitive edge that new technologies offer. Secondly, they lose the ability to respond with agility when new ideas and new circumstances come along. That matters, because agility is potentially a powerful weapon for a mid-sized business competing with a larger rival.

“If they manage to become more agile by using the right technology and technology-driven innovation, that can give them a competitive advantage in the marketplace,” he says.

Awareness is the first step

Miller showed a client (that had several legacy IT systems) the advanced IT that their competitors were using. The client said, “At a minimum, we should be worried about someone disrupting us.”

Alf adds: “The first step in actually addressing these challenges is saying ‘we see technology as an opportunity’.”

 

More on enterprise technology for growth

With technology underpinning every business decision, leadership must take an active role in understanding it. We bust the myth that IT is just for the tech team in: The myth: The tech team will take care of it.

Definitions of IT-speak

Cloud computing

A shorthand way of referring to Internet-connected computers, located anywhere in the world, that run programs for users who log in via the Internet, often using a web browser, whenever they need those programs.

Software as a service

Software as a service (abbreviated as SaaS) is a way of delivering software to its users. With SaaS, a program runs on computers owned by the software supplier (“in the cloud”). Instead of buying a program and running it, users pay a fee — usually a subscription — to access the software, often over the web. SaaS systems typically deliver faster set-up and large feature sets, and their data can often be linked to data in other SaaS programs run by the same user; for instance, accounting systems can link to banking systems.

Data analytics

A set of IT-based techniques for analysing and interpreting the large amounts of data often produced by today’s IT systems, which gather data from web forms, phone GPS systems and other global data sources.

Cyber security

The protection of computer systems from theft or damage – to the hardware, to the software or the information on the systems – and from disruption of the services they provide.

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