Should investing in technology be at the heart of your business?

Should investing in technology be at the heart of your business? Keith Tully from Real Business Rescue comments.

It was Albert Einstein who coined the phrase ‘insanity is doing the same thing over and over again and expecting different results’, and this old adage remains as true today as it did a century ago. But does it apply to your business? Are you merely anticipating growth, or are you accelerating it?

The European Commission recently nailed its colours to the mast by stating that ‘in the digital age, no business can thrive without better use of information and communications technology (ICT)’. As sweeping as this statement is, it’s crucial to recognise that ICT matters for businesses of all sizes. Be it social media, cloud computing, enhanced software or data services, there are numerous aspects of technology that a business should consider.

From start-ups to high street big-hitters, keeping up with the organic evolution of technology is one of the greatest ongoing challenges that businesses face. The retail sector reached a nadir this time last year when British high street regulars HMV, Jessops and Blockbuster entered administration within the same fateful fortnight. All were casualties of a booming online marketplace that their competitors were thriving in. Yet for this once triumphant trio, there was an element of self-inflicted wounds caused by a failure to embrace new technologies, which ultimately left them lagging behind.

For SMEs, the premise is the same. Few businesses can survive without some degree of technology investment. We are increasingly dependent on data and voice communications, and it’s not uncommon to use 3 or 4 internet-enabled devices during a normal working day. Often it is the reliability of communications that hinder business, rather than the systems themselves.

Real Business Rescue is the trading name of Begbies Traynor, and we use The Gazette’s datafeeds among many other sources to analyse levels of company stress. This can give an early indication of companies needing business rescue advice to avoid insolvency, and also helps us understand evolving sector and geographical trends.

Cloud data storage is also topical at the moment, for many workforces, locating business applications and data in the cloud can provide reassurance that your key business systems are protected, backed up and available, whenever and wherever you need them. However, like any in-vogue solution, it’s easy for the lines between ‘need’ and ‘want’ to become blurred.

‘Software technology should only be at the heart of your business if it offers you value,’ says Graham Billsborough, director at the IT consultancy GB3. ‘Too often the IT industry forces the latest trends in software and data storage, such as cloud, out to people with little regard for the actual business needs.

‘In reality, the heart of your business should contain only the applications and data services that achieve your long-term goals. Unless you are in the IT industry, the only time that you should find technology at the heart of a business is when it is contributing to the bottom line and adding real benefit to your employees.’

So can investing in technology help to keep you solvent?

Julie Palmer, Regional Managing Partner at Begbies Traynor, believes that any form of capital expenditure needs to be accurately costed to understand the impact on your profits. She says: ‘You need to look not just at what it will cost, but what the effect of any tax allowances will be and what period of depreciation is applicable. ICT expenditure can have a shorter life cycle than many other forms of capital expenditure, for example.’

Julie continues: ‘You need to carefully weigh these up against what it will add to income and to your company’s bottom line. Does it give you an edge on your competitors, or is it essential to keep up with them? Understanding this balance is key to spending wisely to improve profitability, rather than spending rashly and risking insolvency.’

About the author

Keith Tully has worked in the field of corporate insolvency and finance since 1992 and specialises in advising company directors who are facing financial distress. He offers this support though the website Real Business Rescue. Keith joined business rescue specialist Begbies Traynor (who have a network of 35 offices throughout the UK) as a Partner in 2013 after the acquisition of his own business recovery firm. You can follow Keith on Twitter @RealBizRescue.