January 1, 2003 - - Volume 2, Number 1

Five Ways To Improve Your Technology ROI
by Mark Altenbernd

If you are the owner or manager of a small to mid-sized business, chances are pretty good that you think you may not be realizing the full benefit that your technology has to offer. The computers, networks, and peripherals in which you have invested are probably doing what you intended them to do. But also you probably sense that they could be doing a lot more, that they are underutilized or sit idle much of the time.

We have said on a number of occasions that we can help you get more back from your investment in technology. We have made some general statements about putting idle assets to work and doing additional work in a cost-effective way. What does that mean, specifically? What concrete steps can you take to increase the return on your technology investment? We’ll look at 5 specific things you can do to improve your technology ROI.

But before we start, let’s set a background by doing a quick review of some basic business math. Return On Investment, or ROI, is a simple ratio, or one value divided by another. In this case, it is the amount of benefit received divided by the investment required to achieve that benefit. And further, we can say that benefit is the difference between revenue and cost. By its nature, ROI is better if bigger. There are three ways that ROI can be made bigger: increase the benefit by increasing revenue, increase the revenue by decreasing cost, and decrease the investment. Any technology project you undertake should accomplish one, both, or all three. For each project, we should ask three questions:
1. Will it increase revenue?
2. Will it reduce cost?
3. Will it reduce required investment?

Of course, it’s not always possible to measure precisely the benefit that is to be realized from a technology project; indeed, it can even be difficult to measure the investment required. Large corporations with sizeable IT staffs spend a great deal of time attempting to quantify both the costs and benefits of major technology projects. They must, because the costs of those projects can be figured in the tens-of-millions of dollars. For smaller companies, however, it is usually good enough to accept estimates and approximations, and even non-numeric statements, such as, “If we do this project, it will make our lives a lot easier.” Quantitative precision is to be preferred, of course, as long as the cost of developing that precision is reasonable. The important thing is to be sure that the project in question pushes the numerator (return, or revenue minus cost) up and the denominator (investment) down.

Now with this background in mind, lets look at 5 specific things you can do to increase your technology ROI. In all cases, we will ensure that we are increasing return and/or reducing investment.

1. Extend Equipment Life
One of the great constants in contemporary life is the rapid rate of change in technology. Gordon Moore, one of the co-founders of Intel, propounded Moore’s Law in 1964 when he observed that the density of integrated circuits doubled about once every year; later the rate of doubling dropped to “only” once in 18 months, a rate that has been maintained for the last 25 years and is expected to continue for the next 25. The general extension of Moore’s Law is that the “power” of computers – the speed, capacity, through-put, whatever measure you choose – continues to increase rapidly, while costs drop, and that computing equipment becomes technologically obsolescent long before it is economically amortized. And the developers of operating systems and applications just can’t resist taking advantage of the increased power that’s available to them. As a result, the end user – you – is pushed to upgrade to newer, more powerful equipment sooner than your financial officer and accountant would like. Is there any way to extend the useful life of your computing equipment?

Well, yes there is. Not forever, certainly, but probably for another couple of years, anyway. The trick is to buy more random access memory – RAM. As operating systems and applications become ever more bloated, the principal resource that they consume is RAM. The systems are not particularly well designed to make efficient use of RAM, and why should they be? The cost of RAM, like the cost of everything else, continues to fall rapidly. So rather than spending time and money creating more efficient programs that can fit more features and functions into existing RAM, it makes sense just to create inefficient programs quickly and inexpensively and then throw additional inexpensive RAM at the problem. Net effect: more program power in more RAM at a reasonable cost.

Except, of course, that the newer, more powerful programs are soon demanding more memory than your 18-month-old computers have available. Typically mid-sized businesses have had a two-step response to the problem of newer programs demanding more resources. Step 1: Do nothing, taking a pass on the increased power your applications offer. Step 2: When you just can’t stand it anymore, upgrade your software and, at the same time, buy a new, more powerful computer for everyone who uses the application. Ooops! Even at ever-lower prices, that begins to add up.

An alternative that may be reasonable – and the judgment must be made on a case-by-case basis – is to add RAM to the existing computers. Most or all of the other components of the computers – monitors, disk drives, CD-ROM drives, and so on – will continue to be perfectly adequate for a number of years, so there’s really no point in paying for replacements when all you really need is more RAM. Thus for an expenditure of perhaps $150, on a per-computer basis, you can extend the useful life of your computers for another couple of years, rather than laying out $1000 to $1500 each for a number of new computers. The net effect is to maintain, or even increase, the benefit of your technology while reducing the amount of the investment.

2. Extend Technology Into New Areas
In most mid-sized businesses, computers crept in to meet a single specific need, most frequently accounting. Fifteen years ago, it was usual to see small consulting firms that specialized in installing, configuring, and maintaining networks begin to hook up with small local accounting firms so that together they could offer their clients a fully integrated accounting solution – a one-stop shop for companies that wanted all of the advantages that computers offered but also wanted minimal disruption in converting from a largely manual to a wholly automated system. Presto! A small local-area network, a few connected workstations, and a nucleus of staff trained in the use and increasingly believing in the value of automated systems.

And also lots of unused computer time. It really takes only a couple of hours a day of computer time to do the accounting, and for some people, considerably less than that. So the obvious question arises: is it possible to increase the return from technology while holding the investment constant, thereby increasing the overall technology ROI?

Well, the answer is Yes. And there are two ways the existing investment in technology can be leveraged. The first way is to find generic business applications, the kind that can be used satisfactorily by almost any kind of business. Examples of this kind of application are word processing, spreadsheets, and e-mail.

The alternative to generic applications is business-specific applications that can be added with no, or at least comparatively little, additional investment in technology infrastructure. The specific kind of application depends on the specific kind of business you are in. For example if you are a wholesale distributor of arts and crafts materials, you might find, acquire, and install an application that categorizes and tracks all of your inventory from a wide variety of sources, and then tracks inventory and shipments to a number of different customers in several different categories. When compared to generic applications, business-specific application tend to be more complex, more expensive, and more difficult to install, but they also to have a much greater pay-off.

Either kind of application, if carefully installed and managed, offers the opportunity to increase your return from your technology investment at little or no increase in your investment.

3. Revise Processes To Use Technology
In evaluating technology and its application to business problems, we generally like to say that the technology should serve the business, rather than the other way around, that the technology should be configured to support the way the enterprise is accustomed to doing business. That’s a fine and appropriate sentiment, generally, but it doesn’t do to be too doctrinaire about it. Many complex applications, and especially those that have a large number of users, have been designed in response to the combined needs of companies in the marketplace. Chances are good that the resulting application impounds most of an industry’s best practices, and it may very well make sense for you to modify the way you do business in order to take advantage of those practices.

As a specific example, Altenbernd Consulting has a client that had a multi-step process of capturing the amount of time that customer service representatives spend assisting their various clients. After providing a service, each rep would record the activity on a printed form: customer, time, specific service, and a few words of comment, perhaps. From time to time, a clerical assistant would collect the hand-scrawled sheets and enter the data into the computer for the first time, in a series of spreadsheets, one for each rep. At the end of the month, the spreadsheets would be consolidated and then “pivoted” and printed out on a client-specific basis. The printed output was passed to another employee, who entered the data into another computer, for the second time, this time into an accounting program that prepared monthly billing statements. Finally the billing statements were printed and, along with each client’s printed spreadsheet, mailed to the clients. The process was complex, difficult, time-consuming, and, worst of all, fraught with error. We changed the business process so that the reps now do the computer input themselves, thereby eliminating data transcription errors. In addition, we have the data flow electronically through to the billing program, thus saving several additional clerical steps, increasing the speed with which bills are prepared, and eliminating most of the errors from the old system. In this case, it made good sense to modify the way the company carried out its daily business processes. (By the way, if we were a large, highly paid international consultancy, we would call this “Business Process Re-engineering”. But we’re not; we’re just a small technology consulting firm, so we call it “changing the way we do things”.)

4. Train Your Staff
Unfortunately, most computer applications don’t operate themselves; people operate them. And a surprising number of people who use computers regularly are not particularly skilled in their use. As a result they make a good number of mistakes, work slowly and inefficiently, and avoid use of the computer whenever they can in favor of more comfortable, but slower and more error prone, manual methods. It turns out that most computer users have been either under-trained or untrained altogether. They have learned how to use computers and the complex applications that run on them via the oral tradition, which mixes a lot of myth and fantasy into the prevailing computer lore. The appropriate response to this situation is to provide your staff members with an appropriate level of training.

There are two kinds of training that you can offer your staff: general computer, operating system and generic application training (most businesses use Microsoft Windows, some use the Apple Macintosh, a very few use Linux or some other variant of Unix) and industry-specific application training. For the former, there is a wealth of training solutions: books, on-line courses via either CD-ROM or the Internet, off-site or in-house instructor-led courses, college and university extension courses. Lots and lots of people use computers, operating systems, and generic applications (such as word processors, spreadsheets, and e-mail clients), so there is an active and competitive market for providing effective and low-cost training solutions.

For the latter, training specific to the applications you use in your business, the options tend to be more limited and more expensive, simply because there are fewer people using the applications. The first place to look for training is the company that produces the software. It is likely that either they or a training company with which they have partnered will be able to provide most of the kind of training that will build skill among your staff.

As a last resort and only if you can find no other satisfactory solution after an exhaustive search, you might want to consider commissioning someone to prepare a specific training program for you. Most major metropolitan areas, and most colleges and universities, draw a pool of technical writers and training courseware designers who will be able to help with the preparation of effective training materials. But the potential for run-away costs should be obvious. As with any other IT project, always ask the ROI questions, in this case: “Will the cost of developing this training course be more than offset by improved operating efficiencies and reduction in costs due to error?”

5. Use The Internet To Extend Your Reach
The Internet is fairly new and still not completely understood. IT professionals everywhere continue to work on ways to make the Internet an effective and secure way to distribute applications and consolidate data. The way business is conducted will continue to evolve in the coming years, and it’s hard to predict exactly how it will all end up. But there are things that you can do in the immediate future to take advantage of the Internet without gambling on an as-yet uncertain future.

Most everyone thinks of the Internet in terms of its graphical face, which is also known as the World Wide Web. The Internet is in fact much larger than the Web, but for the moment you may think of them as one and the same. The most obvious use of the Web is to put up an electronic brochure, a point of presence on the Web that will permit people to find you, learn about you, and communicate with you. You can also use the Internet as an effective means of broadcasting information to a select audience – this newsletter is an example of how we at Altenbernd Consulting use this capability – and also to enable two-way communication, to permit the recipients of your information to respond so that you know what they are thinking and feeling. (To learn more about the effective use of the Internet, refer to our previously published newsletter articles Four Ways To Make Your Web Site More Effective and Four Ways To Help Your Web Site Attract New Clients. )

As with any other project, we should ask the same questions of our efforts to extend our reach by using the Internet. Our expectation is that we will be able to reduce our operating costs while improving our ability to communicate with our prospects and serve our customers.

If you are anything at all like most other mid-sized businesses, your technology investment is underutilized. You can improve your return on that investment by taking a number of small, easy steps to help you increase returns and lower costs in your business. In this article, we have looked at 5 specific steps that you can take.

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We can help
At Altenbernd Consulting we have helped a number of small and mid-sized businesses leverage their computer and network infrastructure to get more back from the investments they have made. If you are such a company and would like to consider small, specific steps that you can take to improve your technology ROI, perhaps we can help you. Visit our Web site to learn more about how we can help you: http://www.Altenbernd.Com.
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© 2003 Altenbernd Consulting, LLC. All Rights Reserved.