Failing to adapt to the changing technological landscape will see you get left behind
TECHNOLOGICAL shifts are the norm in business – no sooner had the early car manufacturers begun to turn a profit than they saw their market share collapse in the face of Henry Ford’s assembly line methods. But the pace of change has accelerated, presenting small to medium-sized enterprises (SMEs) with an unprecedented range of options to help drive growth, while staying resilient and responsive to customer demands.
Cutting-edge innovations in 3D printing, robotics and artificial intelligence look set to transform the manufacturing and service sectors, while the accessibility of cloud and mobile computing for smaller firms has increased as prices have plummeted. In 1990, the cost of storing a gigabyte of data was roughly $10,000 (£5,937), according to calculations by software engineer Matthew Komorowski. Today, with the latest cloud storage technology, a gigabyte of data costs as little as $0.026. The RSA, meanwhile, in its 2013 The Flex Factor report, sponsored by Vodafone, identified total potential savings for UK firms of £8.1bn through the adoption of flexible working.
But finding and implementing the right technological solutions can be challenging, and smaller firms can be reticent to seize the opportunities. Lloyds Bank’s latest UK Business Digital Index found that 75 per cent of SMEs are not investing in improving their digital skills, and this digital “blind spot” could cost businesses dear.
THE PROMISE OF DISRUPTIVE TECH
As an indication to UK SMEs of the potential, a study last year by Boston Consulting Group found that “SME technology leaders” – companies in a series of developed markets that are ahead of the curve with IT adoption – far outperform their peers (see graph). The compound annual revenue growth rate for these firms was 13 percentage points higher between 2010 and 2012 than for the “tech laggards”.
By adapting to the current wave of disruptive “cloud-based” technologies, for example, forward-thinking SMEs effectively have many of the capabilities previously reserved for far larger companies. Upfront costs such as servers, and extensive IT departments, can effectively be rented through an internet connection, at a fraction of the cost. A survey by Rackspace last year found that switching to the cloud could reduce IT costs by as much as 23 per cent for UK and US SMEs.
As Tim Rideout of the Scottish map seller XYZ Maps (which implemented cloud technologies recently) says, “it’s a cheap way to have gigabytes of storage space for product downloads with fast connections.” However, he also points out that that there are risks to being dependent on a broadband connection, and there is a need to ensure that technological solutions are resilient to crises. Moreover, technology officers can be concerned about moving from bespoke applications on their current systems to more “generic” ones in the cloud, according to a report by Deloitte. The two applications can be knitted together, but this is an additional cost.
But the cloud is by no means the only disruptive technology available to smaller businesses. A 2013 report by McKinsey identified 12 potential areas of technological transformation. The technology with the most promise, it found, was mobility and the mobile internet. As capabilities continue to grow (an estimated 3bn more people will be brought into the digital economy by the spread of mobile), businesses will need to “consider how performance could be enhanced by enabling increased mobility, augmenting worker knowledge and capabilities or facilitating collaboration and social interaction.” One key trend resulting from the growth of mobile and other portable devices, according to Vodafone’s report The New IT Crowd, is the Bring Your Own Device (BYOD) movement. Of employees who can already use their own device for work purposes, around 77 per cent of those surveyed said they were more productive.
As the BYOD example illustrates, there are significant implementation risks for SMEs in rolling out these new technologies. Of the businesses surveyed by Vodafone, 72 per cent had experienced a mobile security breach of some kind in the last 18 months, with the downloading of unauthorised content (30 per cent), malware and sypware intrusions (28 per cent), and data leaks (21 per cent) the most common instances.
Neil Stride, Vodafone channel head for mobile data solutions, says that having a security policy for BYOD is a must, but he also highlights a range of alternative systems. “Choose Your Own Device is fast becoming the norm, enabling individuals to choose the right solution for their role and lifestyle but remaining controlled under the IT corporate umbrella.”
THE NEW BUSINESS STRATEGY
Despite the implementation risks, increasing numbers of SMEs are eyeing up technologies like cloud and BYOD. And it’s not just about shedding the costs associated with physical servers and clunky IT systems. Vodafone’s New IT Crowd report found that 86 per cent of IT directors said that they need to think more about the strategic role of technology in their business. “People are looking to technology not just as an internal, admin function, but as a whole business enabler. IT is now at the heart of a successful business strategy,” says Owen Daley, founder and managing director of IT systems management firm SilverBug.
Open source programming, in which the source codes for software are made publically available for people to experiment with, is a case in point. According to Rackspace’s survey, 56 per cent of organisations said they are using open source technology as part of their cloud strategies to drive innovation. This represents a sharp change from past attitudes – in 2007, a Gartner survey found that 80 per cent of companies were using open source purely because of the lower cost. But by allowing employees to tinker with the code, companies are now more interested in innovation through wider participation, making technology a central part of business strategy and growth.