In the past, when a company talked about information technology (IT) strategy, the focus was on having the right accounting and enterprise resource planning (ERP) software in place. Now, with so many new tools impacting the industry, manufacturers and distributors should take a more comprehensive look at technology strategy.
Increasing Technology Complexity
Recent trends prompting companies to rethink their overall technology strategies include:
• Changes in the accounting and ERP software vendor environment. Oracle’s acquisition of JD Edwards and Peoplesoft is impacting the mid-sized software segment. Additionally, Microsoft Business Solutions and Sage Software focus on mid-sized manufacturers and distributors, upping competition among traditional legacy vendors in this market.
• Radio frequency identification (RFID) and wireless technologies. Many manufacturers and distributors are purchasing these abilities to improve warehouse management and point-of-reference data collection. But in other cases, customer-driven initiatives for installation and implementation of new technologies like RFID are forcing suppliers to invest in expensive systems as a condition of doing business.
• Internet-based technologies. The Internet is changing the way companies conduct transactions. Many web technologies are designed to interface between customer and vendor, but there are internal Internet-based applications as well. Replacing older legacy phone systems with voice-over-Internet protocol (VoIP) telephony is growing, while company intranets improve internal employee communications.
• Automated equipment. Almost all new shop floor systems are computer-based. These systems can provide desirable levels of efficiency and cost savings.
Developing Your Strategy
The first step is to assess where you are today. Organize a management-level technology planning team to conduct the initial evaluation and develop a three-year technology strategy plan. This group should consist of key members of the executive management team, operational department leaders (operations, customer service, sales, finance), and your IT leader. Members also should be objective problem solvers willing to look at the needs of the overall organization—not just the specific requirements of their own departments.
The planning group should start by inventorying the company’s existing technology resources and evaluating how effective these resources are in supporting current and future business needs. Typically, a technology assessment identifies the following:
• Systems that are working well and need limited attention.
• Systems that appear to have strong capabilities but haven’t met company expectations. In these cases, the future technology investment may be in training rather than in hardware and software.
• Systems that no longer meet the needs of the organization and should be replaced.
• Areas of the company that have a need for automation or systems but where technology isn’t currently implemented.
Once the initial assessment is completed, the planning team can identify significant initiatives for the three-year planning horizon. These initiatives may represent a technology project that requires a significant investment of time and personnel—projects like replacing the phone system, implementing a company-wide intranet, or developing a company-wide financial reporting system. These plans are viewed as important technology investments that go beyond the day-to-day technology maintenance expenditures required to keep the current infrastructure operational.
Most companies find the list of strategic initiatives much longer than anticipated. A key responsibility of the planning committee, then, is to prioritize the plans based on a set of cost justification and evaluation factors. Typical prioritization aspects include use of technology to gain competitive advantage, operational improvement opportunities, and cost to implement.
When ideas are prioritized, estimated budgets can be assigned to each project. When estimating costs, consideration of hardware, software, personnel, and training expenditures are necessary. Based on costs and available budget dollars, the core initiatives can be slotted into appropriate timeframes for implementation.
The planning process requires a great deal of discussion and management analysis. Once developed, this can be used as a management tool to evaluate new requests and ongoing technology investments. Most organizations, if asked, can’t produce a list of designed technology plans. As a result, major “unplanned” investments in critical technologies can become a source of major frustration and a drain on resources.
Information technology policies will continue to be an important part of every company’s operational budgets. If your company hasn’t initiated a formal technology planning process, there’s no time like the present. Technology planning doesn’t have to be an overly complex exercise. However, if performed with appropriate management attention and forethought, it can result in improved procedures, better use of your overall technology budget, and increased efficiencies and a sustained ability to maintain your competitive edge. IBI