Cost-effective technology in the crunch

By Patrick Kershaw, Horizon Pacific

I’ve been in Europe recently, studying the markets to get a proper grasp on what sort of fall back New Zealand’s SME technology sector can expect – and to ensure that I can advise my clients on how to brace themselves for further financial woes stemming from the United States.

This has been an interesting process. The situation being talked about in the media in Europe is far more dramatic than we are getting here, so time will tell the result.

I still believe the only businesses that are really suffering will be those that have over-extended themselves in the past two years. Nonetheless, there are things you can do to squeeze cost and efficiency from your technology model.

1. Stem spending
 Depending on your cash flow situation, stop all unnecessary projects immediately. This will stem spending and provide extra cash immediately. This includes any consultancy costs for technology you may be incurring.

2. Budget review
 Re-evaluate your budget for the 2009 year now with your technology provider. If you don’t have a budget, get one. According to the Wall Street Journal, over 60 per cent of Fortune 500 companies are currently in the process of halting technology projects and renegotiating with vendors. If you can, renegotiate with your technology provider on service rates or shift to a more OPEX (Operating Expense) based model. This would include investigating Software-as-a-Service and hosted options, which should cost much less to run and should ensure you don’t get left behind. You may also want to investigate open-source software, if it fits your business model.
 However, I would not recommend moving to a variable cost model as it has the potential to blow out – the last thing most businesses need right now. Avoid it, unless you have strict guidelines in place with your providers.

3. Outsourcing versus in-house
 Consider outsourcing your technology staffing for fixed fees, as generally this should be cheaper than having on-site technology staff. The pay-off here will be in response times to issues. However, these should be negotiable.

4. Train your staff
 Leverage your existing infrastructure by asking your technology provider for any free manuals or training they can provide for your current systems. You will often find a little training can improve staff output by large percentages which will add to your bottom line.

5.  Consolidate
 Look at getting rid of unnecessary hardware, eg dumping the three faxes and scanner, and moving to centralized, high quality, multifunction devices. Xerox, although the most expensive in this field, will actually save you the most in the long run. Be sure to negotiate favourable contract terms – your technology supplier should be involved in this – and any hardware redundancy planning.

5. Disconnect unused phone lines
 Your technology provider can help you with this through the organising of telephony reporting, which has a one-off cost of from $20-$50, and will show you where you can make cuts. Avoid new phone contracts at all costs as Voice Over Internet Protocol (VOIP) will save you money in the coming 18 months.

6. Regulation change management
 The Sarbanes-Oxley financial reporting regulations will swing into action in all businesses within the next 12 months. On the back of the financial meltdown, the Government will hasten the Acts that the Australian and US governments passed years ago, requiring, amongst other things, businesses to have seven years’ worth of data backed up, including emails. Look for an online backup solution with an insurance policy around data loss. This is very affordable, and the insurance component should be tied in by the provider. I believe, similar to overseas, it will become a requirement of commercial lenders that all businesses lent to have this in place. The insurance component is crucial, as over 90 per cent of businesses that have critical data loss are bankrupt within 12 months.

Above all, do not cut your nose off to spite your face. Your technology system is still vital to your business and you need to ensure that you are making savings in the right places without adversely affecting the productivity and efficiency of staff.

Patrick Kershaw is a business partner in Horizon Pacific, a nationwide specialist in providing technology solutions for SMEs. For more information contact patrick.kershaw@horizonpacific.com

NZLawyer, issue 101, 14 November 2008