Girl making IT purchase on a tablet using credit card in public

Reducing Risk of IT Purchases for Small to Medium Businesses (SMBs)

4 Nov 2016 by Michael Lazar

Reducing the risk of IT purchases should be a primary focus for SMBs when creating a long-term IT strategy. The first step is found in partnering with the right provider, one that can lower your risk. Key components of an effective IT strategy plan in motion include: Roadmap, timing, building blocks, spend allocation, integration, deployment, onboarding and support.

Seeing the full picture is important when pursuing your strategy for IT investment. Behind the scenes, there’s quite a bit going on. So it’s always a good idea to have an executable roadmap in place that you can rely on; one that guides your company from the starting point all the way to the finish line.

SMBs spend $600 billion per year on IT

SMB IT spending is at an all-time high. Think tank, Techaisle forecasted that SMBs spent over $600 billion on technology in 2015, a number that has increased in the year since this report was released. 

Chart of SMB & Midmarket IT Spend

Mobile represented the greatest area of spending, and is tantamount to a growing Bring Your Own Device (BYOD) workplace atmosphere. The same forecast found that 42% of SMBs would be mobile by Q4 of 2015, with U.S. based SMBs forecasted at 53%.

As far as new technology spending is concerned, U.S. based SMBs also topped the list, collectively spending more than $100 billion on tech. Key areas of spend included: Mobility ($49b), cloud ($29b) and IT managed services ($18.8b). 

Chart of US SMB New Technology IT Spend 2014

Mobile represented the greatest area of spending, and is tantamount to a growing Bring Your Own Device (BYOD) workplace atmosphere. The same forecast found that 42% of SMBs would be mobile by Q4 of 2015, with U.S. based SMBs forecasted at 53%.

As far as new technology spending is concerned, U.S. based SMBs also topped the list, collectively spending more than $100 billion on tech. Key areas of spend included: Mobility ($49b), cloud ($29b) and IT managed services ($18.8b).

IT spending, overall, has climaxed within the small business sector, as the value shift from enterprise-level spending reshapes this industry. Furthermore, as mobility and cloud become increasingly accessible and affordable, forecasts are projecting ample growth with SMB tech spending in the years to follow.

What the Chief Information Officers (CIOs) want

Although stakeholders across the business are often big contributors in IT decision making, CIOs are the highest up the chain of command. So what are they looking for in the IT purchases that they are making? According to a Deloitte survey, CIOs are primarily focused on these factors when vetting products and solutions in IT purchasing:

  • Delivery of business outcomes through IT services
  • Enhancing the customer experience
  • Improving IT agility
  • Converting IT into a profit center
  • Investing in emerging technologies
  • Creating a seamless User Experience (UE)
chart of key dimensions of the CIO portfolio

A related Tech Pro Research survey showed that 71% of CIOs want to “improve applications to better fit business processes.” Meanwhile, 67% want improved IT security, while 65% are focused on performance and infrastructure upgrades. At the lower end of the margin, 56% want more adequate IT personnel training, 48% want reduced IT cost and 36% want to migrate company servers to the cloud.

chart of IT initiatives do you plan to pursue priorities in 2015

Pepperdine’s IT strategy map

At the core of a good technology purchasing strategy is the strategy map. Getting yours in place is an incremental and smart first step. The Pepperdine IT strategy map helps put this into better perspective by illustrating how IT can directly impact cost improvement levers for SMBs. The chart below compares and contrasts several figures to help you create your IT purchasing model. These include: Tactical improvements, strategic structural improvements, cost improvements levels and cost savings. 

chart compares and contrasts several figures to help you create your IT purchasing model.
The chart below compares and contrasts several figures to help you create your IT purchasing model. These include: Tactical improvements, strategic structural improvements, cost improvements levels and cost savings.

Listed by Pepperdine as the most important factors in IT purchasing for SMB are a few of the following factors:

Reduced ownership cost: Software as a Service (SaaS) offers an average “five-year lifespan” and is the surest means by which CIOs can reduce IT spending and cost.

Less implementation: Reduced reliance on hardware and software platforms, by migrating to the cloud, improves success rates and curbs cost.

Outsourced services: Outsourcing to an IT managed service provider is an effective way to control costs and improve accountability.

Hosted software: While this solution type comes with a higher integration cost, in the long run, the maintenance is less and the reliability is greater.

Cost vs. return on IT purchases

Thinking ahead goes a long way when making IT purchases. One of the most important metrics is cost versus Return on Investment (ROI). An Idealware publication emphasizes this. When considering ROI, you should also make sure to factor in productivity hours and time lost from your current technology solution; two commonly overlooked factors that help round out the worth of the actual return.

As Idealware explains, net gain over cost also needs to include other elements, such as staff disruption resulting from inadequate and obsolete IT solutions. Other things that shouldn’t be overlooked include: Cost of training and support, integration and deployment costs, disposal of old technology and improvement of existing operations due to new technology.

The benefit of IT managed services

Don’t overlook the benefits of using IT managed services. As Syntax advises, “Reducing IT costs is one of the most compelling reasons for outsourcing IT to a managed service provider. [Enterprise Resource Planning] ERP hosting helps small and midsize businesses control capital expenditures, especially during the first few years of business operations.”

IT managed services also come with an array of other benefits, too:

  • Access to emerging technologies without the traditional in-house cost barrier
  • Security and compliance that’s managed by a provider
  • Expedited risk management that’s managed by experienced professionals
  • Access to a pool of experienced IT experts
  • Around-the-clock systems and software support for your employees
  • Lower training and support costs overall
  • A more scalable solution that can fit SMBs of all sizes

Creating an IT strategy plan

When devising your roadmap, it’s never a bad idea to consider leaning on IT strategy consulting experts for advice. Doing so can help you avoid missteps along the way, which could prove costly in the long run. Partnering with a leading technology provider like Insight gives you direct access to our more than 25 years of experience in this industry. Our specialists will work with you to create a scalable and cost-effective roadmap for technology integration that fits your budget and meets your needs.