Six smart ways to grow small business IT

The enterprise has a lot to teach small businesses -- like these six lessons (some painfully learned) from the big boys on the technology block

It's one of the great truths of capitalism: Businesses want to grow. Small businesses want to become midsize businesses, and midsize ones want to get big.

But getting bigger involves growing pains, and nowhere do many up-and-coming companies feel that pain more acutely than in IT. We've all heard horror stories of companies whose growth was hobbled -- or worse -- by inadequate support systems.

Like a child who always needs new clothes, your successful business will likely outgrow its IT outfit several times as it gets bigger. And in the same way that new parents learn coping skills from more experienced families, small and midsize businesses that want to ensure their IT infrastructure keeps pace with their growth can benefit from what big companies already know.

Just what do they know? We picked the brains of IT professionals who work at firms that provide outsourced IT services to companies of varying sizes (most have in-house experience as well) and broke their advice down into six basic lessons.

Their main message? Think strategically. Make decisions not on the basis of what you need right now, but on the basis of where you want to be in six months or a year.

Your changing IT needs "will be upon you even faster than you expect," warns John Baschab, president of the management services group at Technisource, an IT and engineering outsourcer. Heed these six pieces of advice, Baschab and other experts say, and you'll never have to go to work with an IT infrastructure that just doesn't fit.

Put IT in your budget

It's tough for cash-strapped young companies, but it's crucial: Make sure IT has enough space in your budget. "Small businesses don't know how to budget or plan for IT," says Dave Brewer, president and CEO of BC Networks Inc., a managed services company focused on the small and midsize market. "In an enterprise, they might budget $10,000 to $12,000 per employee per year. A small business might have a hard time spending a tenth of that, for both budgetary and vision reasons."

In particular, Brewer says, small businesses rarely if ever budget enough for support or training. Often the result is that employees are not up to date on the latest software and are not working as efficiently as they could. Brewer's advice: budget 10% to 15% of salary per employee per year for IT.

And then institute some way of knowing that you're getting your money's worth from your technology investment. Don't just add money to your budget -- come up with some kind of financial model that will enable you to know whether you're getting what you're paying for, recommends Dan Hoover, vice president and area director at Ciber Inc., an international systems integration consultancy.

Enterprise IT organizations use return on investment analysis or some other investment evaluation method, Hoover points out, but small firms that may not have established such a formalized approach to ROI can get by with a simple payback period analysis, he says.

To perform such an analysis, Hoover says, companies should first identify all the expected costs associated with a technology investment (software, hardware, internal and external resources, communications fees, workspace and so on). Then they should forecast all of the expected financial benefits (reduced labor costs, lower inventory-carrying fees, increased production and the like) and quantify them.

"If your costs are recovered in the first year," Hoover says, "the project is worthy of serious consideration, especially if the benefits are high. If the payback period is more than a year, it may be best to look elsewhere."

Plan your IT future

Dedicating more money to IT won't help if you don't have a plan for what you hope to accomplish. It's not just about budgeting more, says Brewer, but also about allocating your budget properly.

"Small businesses tend to think in terms of replacement. When they make their technology purchases, they're buying to fill a gap -- to replace technology that's worn out or unsupported," says Kevin Karcher, vice president of the infrastructure IT outsourcing team at Electronic Data Systems Corp.

Problem is, such companies tend to use whatever versions of the operating system and software are on the new machines when they buy them. The result can be a collection of mismatched systems that is harder to administer to and that makes training more difficult. "That's not strategic thinking," says Brewer.

Another danger to that behavior pattern is that small businesses can end up not with just a hodgepodge of systems, but a hodgepodge of cheap systems. Making ad hoc buying decisions based on immediate needs tends to lead to buying whatever is on sale at the local electronics superstore. That in turn means a network assembled from less-robust routers and switches, a consumer-level firewall and other technology unsuited to the needs of a growing business.

Karcher says that major corporations don't look at such "point" solutions; they spend more time and energy on integration, which in turn allows them access to best-of-class applications. Through research, planning and understanding of the business units' needs, enterprise IT is better able to acquire and integrate leading technologies from multiple vendors.

And paying attention to integration from the outset can give a small company not just access to higher-quality applications, but standardization and consistency as well.

"There's a benefit to the process discipline associated with doing routine things in the same repeatable fashion in an efficient way," Karcher says. "Standardization brings definition to process, roles and responsibilities, and this consistency and repeatability allows an organization to become more efficient."

Make IT part of management

IT's influence extends beyond just getting the best equipment. "The [small business] owner needs to think of IT as a part of the management team and include them in discussion of what the business is about and where it's going," Hoover says.

Involving IT managers early in discussions about business direction allows them the opportunity to meet the business owner's expectations for timing and costs. The department may even find ways to improve business direction through the use of technology, Hoover suggests. "Enterprise IT organizations have used [technology] to reduce labor costs, speed time to delivery and bring process discipline to their organizations," he says.

Technisource's Baschab points out that IT sits at the intersection of numerous vendors -- Internet providers, management consultants, hardware suppliers, staffing firms, telecom and datacom providers and more. That means managing relationships outside the organization, which is properly a management-level task that shouldn't be left just to technicians.

Karcher agrees: "If you do not have an IT professional on your team who can interact with your business team and decision-makers -- get one."

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