Investing in IT – Yay or Neigh

 

Ever since 1987 Nobel Laureate Robert Solow wrote in the New York Times that he can see the computer age everywhere except for productivity statistics, much has been written and argued about it.

More recently, Nicholas Carr, in his 2003 article “IT doesn't matter”, stated that technologies were commodities, accessible to anyone and that the most prudent thing to do was to invest as little as possible, and again generated many conflicting opinions in favor of and against.

David Solomont, a well-known venture investor in the Boston area, recognized the opportunities of the information technology more than forty years ago. With vast experience in the information technology, interactive media and software industries, he is an active investor and advisor to early stage technology companies and was the founder of Common Angels in Boston, one of the first institutionalized angel groups in the country.

In his opinion, the non-adoption of technologies can make a company lose the opportunity to obtain true competitive advantages (probably for a time), and that at the same time a competitor can introduce these innovations, that can lead other companies to their demise. In these times, there are examples galore. Mr. Solomont also points out that the same technologies can obtain different results depending on when they are implemented, how they are implemented, and according to the context of the organization and its processes.

In short, what can be concluded is that for companies is not the technologies themselves, but the projects in which technology is an instrument to carry out innovations for competitiveness.

So, we will have to start at the beginning: what objectives or motives drive a company to invest in technology? If the answer is to adapt to legal and tax changes, no problem: the company has a destination of disappearance.

On the other hand, if you are looking for competitiveness and your insertion in this new society that carries out a new technological paradigm, we will have to analyze a little more the objectives that it pursues, which, on the other hand and of course, is neither one, nor are they alternative and, possibly, mark a path of evolution of the company in the path of competitiveness (and not of technology). As things stand, what is at stake in the first place is survival.

David Solomont identified three fundamental motivations for IT investments: improving operational and administrative efficiency; improve the relationship with customers, suppliers and society in general; and define new markets and new business opportunities.

Information technologies are very good instruments for innovation and competitiveness projects. If you carry them forward, you can reap significant benefits until your competitors match or exceed them. If you do nothing, you will probably work on other projects to try to survive.

Finally, with clear IT investment objectives, companies must be more rigorous in the evaluation and implementation of technology incorporation projects. Analyzing the totality of the intended benefits and the flow of direct and indirect costs that they involve is essential to be able to decide between different alternatives that always appear, even with other investment projects that are not directly related to information technology. Then, carrying out a rational implementation will make it possible for the project to achieve benefits or directly fail.