If you're a chief executive, information technology (IT) is such a complex subject. There are many solutions, many people and technology issues. You don't have time to understand all these things to help yourself be on top of the game," says Freewill Solutions' director for business consulting services Peter Theisen.
Typically, in setting an IT budget for next year, a chief executive will either look at last year's budget or consider some special projects that he or she plans to launch. The latter case is normally driven by users; for instance, a complaint from the marketing people.
And when he or she sees an IT-budget proposal, quite often a chief executive will ask, "why is it so expensive?"
Then the CEO will either ask something like, "can we cut it by 10 per cent?" or will try to understand what other companies are doing, usually through benchmarking, such as comparing the figures for IT budget per revenue.
However, benchmarking can often be misleading. Theisen says that about two years ago, a Freewill study of Thai securities companies found a huge difference in their ratios of IT spending per revenue. These varied from 1.6 per cent at the lowest end to 10.6 per cent for the biggest spender.
This was because the firms that had older systems might have needed to spend more on IT, while others that had invested in new IT systems within the previous two years could afford to lower their budgets for the year.
Theisen says firms can lose business opportunities if they fail to invest in the right technologies. If they look only at costs and are too slow to invest in the right technologies, they might be left behind.
"I'm not saying: 'don't look at costs'. One thing [that should be remembered] when a company is planning for an IT system: they are not preparing a proper case for that system. While cost savings might be easy to calculate, it's very difficult to gauge how much revenue will be generated [from IT investments]."
For example, it is hard to measure how much better customers are going to be served by investment in a customer-relationship management [CRM] system.
Theisen says IT departments have a "culture" of looking only at costs. Quite often, IT departments will suggest that the company should wait for costs to come down, while overlooking the damage that might be done to business costs, or through lost opportunities.
"Normally, chief information officers are conservative. If others do something, they will do it too, so if a project fails, they will be safe," Theisen says.
Chief information officers should change their mindset, and look also at the benefits of IT investment and be aware that in some cases the opportunity costs can be much higher for businesses if IT projects are not implemented immediately.
Moreover, a study by leading IT research company Gartner has revealed that the IT industry worldwide is good at buying something new, but fails to look at things they bought in the past.
Because businesses change, some IT systems and equipment become obsolete, or demand for their services is reduced. In addition, IT prices usually come down rapidly. Therefore, companies should go back to check these legacy systems at least once a year. They should look at demand, and decide whether they still need these systems. They should also look at optimisation, or finding new ways of making these systems cheaper. Finally, firms should renegotiate their contracts with IT vendors, citing changes in demand or market prices.
"There is something about these relationships as well," Theisen says. "[Some IT staff may think:] I don't want to hurt the vendor. He has been my friend for 10 years."
Theisen says today's world is very much about having "the right people and the right technologies."
Another typical mistake, from a chief executive's perspective, is to instruct the IT department to implement a project without training them in people's behaviour. Many IT projects have failed, Theisen says, because the systems have been applied without a proper installation of a change management programme or taking into consideration the "people aspects."
For example, a firm implements a mobile solution to check on the attendance of its staff, but overlooks the fact that its site managers do not like to be controlled in this manner, and some workers will lose extra incomes because of the need for precise attendance.
"From our experience, we often see that the IT [departments] of companies write a lot of reports [that are beneficial to business conduct] but the businesses don't know about them."
On this issue, Theisen says Freewill is conducting an IT shared-services project for a client, to integrate its systems in five Southeast Asian countries, and part of the job is to train IT staff on how to "talk with the business functions".
To ensure the successful execution of an IT project, Theisen suggests that companies assign a mixed team to the project, comprising involved staff from both IT and business functions.
He says Freewill is planning to conduct another survey of chief information officers in the next two months, but this time it will cover not only securities firms, but also all major industries.
The objective will be to find out what values and priorities companies are pursuing by implementing IT projects at present - whether, for instance, they seek to cut costs, boost relationships with customers, or glean business intelligence.
In its previous survey of CIOs, Freewill found that Thai securities firms had cut their IT budget spending per revenue from 6.2 per cent in 2006 to 3.9 per cent in 2007.
Theisen says that Freewill is currently overwhelmed with projects from clients who suspended their IT investments after the bloody rioting in Bangkok earlier this year.
A former senior consultant for management consulting, technology services and outsourcing company Accenture in Germany, Theisen gained a PhD in aerospace and aeronautics engineering from the University of Stuttgart. Having decided to move to Asia, he took an executive MBA programme at the Sasin Graduate Institute of Business Administration in Bangkok, before finding a job with Admax Group and MSN Thailand and later joining Freewill.
Freewill Group includes three major subsidiaries: Freewill Solutions, responsible for business and technology consulting; Pantavanij, which offers e-marketplace services; and Freewill FX, which provides mobile technology solutions. It is part of the Charoen Pokphand Group, one of Thailand's largest conglomerates.
Freewill recently announced a plan to grow by 30 per cent annually over the next two years to reach a revenue target in excess of Bt1 billion in 2013. |
