Typically information and communication technology (ICT) is one of the largest line items on any company’s income statement. For most organisations, it is second only to salaries. And it’s growing. According to analyst house Gartner, ICT spend in South Africa is forecast to hit R272 billion in 2016, which is 3,8% up from 2015. Software, specifically, is set to reach its highest year-on-year growth at 11,4%, or R25 billion.
And, based on predictions around the rise of the machines, and how automation is going to take over many tasks that are carried out by people today, this spend is going to keep on rising – probably even cannibalising salary spend.
What does this have to do with accountants? You just check the numbers, right? You don’t decide where the money is spent. While this may be the case today, you need to ensure you stay relevant tomorrow. And as an accountant, you and your firm are probably looking to add more value to your clients. You’re exploring ways to offer enhanced services over and above the ‘grudge’ purchase of audits and other mandatory financial services, in order to entrench yourself as a valued, strategic partner in your clients’ businesses.
I’d suggest thinking strategically about your clients’ ICT spend is a good place to take the lead. Increased involvement with this crucial, and massive, cost centre could hold the key to a more meaningful, closer, accountant–client relationship. One where your client comes to you for strategic advice and input, and, come the big deals – acquisitions, mergers, IPOs – you’re called in to get involved sooner rather than later.
With ICT spend such a big, and growing number, on any income statement, it’s an area where you can help effect big number changes. What’s more, the turbulence and disruption in the business world at the moment, thanks to digitalisation and the urgent need for businesses to transform themselves into digital economy operations, means that what worked a few months or years ago, has very likely been supplanted by a better option at a more affordable price or with a more relevant payment structure.
ROI: A PIPE DREAM, OR A REALITY?
You can start by helping your clients measure the return on investment of their current ICT systems. Is ICT ROI something your clients even check? Three to five years later, have the ICT products and services delivered what they promised? Have the software, hardware and related services really added value to the business? And don’t forget to factor in the total cost of ownership several years down the line, not just the initial outlay.
A key marker here is finding out to what extent the user-friendly solutions your client was sold have transformed into ‘black box’ solutions, where, even five years after installation, experts still need to be called in to make changes to the so-called flexible systems.
This situation is in no way delivering optimal ROI. Today, software should be user-friendly and enabling to ensure that, once it is installed and the users are trained, your client should be able to self-manage day-to-day and month-to-month changes. Otherwise, it’s like going to the doctor for a head cold, and getting them to blow your nose!
BEWARE THE BELLS AND WHISTLES!
Then, is your client using all the bells and whistles they were sold on, or are they only using the essential 5% but paying for everything? It’s an easy trap to fall into. Think back to the last time you bought a car and were wowed by the functionality of the on-board computer. Or the fact that the wing mirrors have a defogger and the seats, a warmer. And then think about whether you really use all these features of your car. Being realistic and rationalising what the company actually needs, and only paying for that, is going to dramatically affect the procurement decision and the ultimate ROI.
LOOKING INTO YOUR CRYSTAL BALL
The biggest challenge any business faces is that they need to make decisions today for an uncertain and rapidly changing digital future. Indeed, futurist Ray Kurzweil says (no surprise here!) the pace of technological change is accelerating. This is because each iteration of tech builds on what has happened before, and so each step forward paves the way for even better technology in the future, resulting in the rate of progress from version to version speeding up at exponential rates.
To take an example from the non-business world: think about how fast, and with increasing speed, how we consume music has changed. From vinyl, to more portable cassette tapes on Walkmans and car radios, to better-quality sound on CDs. And now, MP3s that we simply buy and download off the Internet, wherever we are. And although we loved our iPods, very soon there was need for an external ‘container’ or playback device: today we store and play music on our laptops, tablets and smartphones. But even this is soon going to be old-fashioned. Thanks to dropping data costs and increasing bandwidth, streaming music from the cloud is going to become standard. No need to store files locally, or curate your own playlists. Rather listen to what you want, when you want it, on the go.
Unfortunately, on this one I don’t have a quick answer or top tip for you. Apart from recommending that you be mindful of the rate of change we are experiencing, and advising your clients accordingly. Quiz ICT service providers on how they future proof their products and services. How open and adaptable are they really?
While vinyl has made a comeback amongst hipsters and music purists, it’s unlikely that retro business software and practices are ever going to be a sensible choice for a successful business.
All businesses are IT-enabled businesses today. And neglecting ICT for any length of time could be costing your clients dearly. But pay it attention, keep on top of changing legal, regulatory, skills and business requirements, and ask how ICT can support these, and you can gain big wins for, and big love from, your clients.
Published in ASA Magazine February 2017 http://www.accountancysa.org.za/focus-this-month-leadership/#ict