By: Lakshminarayanan Hariharan, Vice President-Delivery & IT, MyCFO
It is an assumption that implementation and use of technology – hardware, software and tools – will result in fueling growth to business. Growth must not be merely defined as top-line growth. It should be inclusive of efficient supply-chain management for inventory control, cash management, fast-tracking period closing and performance management.
The leverage of technology is very diverse from industry to industry. Aerospace, medical, digital, media, research & development etc. witness higher adoption of technology to provide an edge for companies. On the other hand, companies in retail, manufacturing and BFSI segments leverage technology for efficiencies in business process and delivering quality customer services.
There is a conscious effort across industries to eliminate or limit the amount of in-person services that the organization used to provide and instead the customer is being provided the platform to use / source the products or services, get data and analytics, and provide intelligence for decisions, all through the leverage of technology. The following graph gives an industry-wise representation of IT spending as a percentage to revenue, providing an insight on the extent of IT leverage across the board.
Technology by itself is a very broad term. It mainly includes (but is not restricted to) –
- ERPs: Internal to the enterprises for integrated management of resources, it is a very important medium to bind the global existence of manufacturing hubs and consumer. Some ERPs also provide features for interfaces with customers and vendors; and thereby, forming a key spoke in the supply chain management.
- Software: These are embedded in the end products which are consumed directly by end-users. The key to the success of the end product is in the advancement of the software’s used, which will enhance the output, durability, product features, multi-utility options and boost customer morale (e.g. high feature mobile phones, tablets).
- Service enablers and portals: These tools are either direct interfaces with the customers or assist in providing quick and efficient solutions. Often, it is a medium for e-tailing, payment gateways, access to information, service triggers etc. —to name a few broad needs.
Each of the above technology usages are directly linked to growth for any organization through enhanced sales, consumer visibility for product and service availability, post sales services and to capture trends in the buying patterns. The other non-tangible benefits include data availability for analytics on buyer profiles, shopping patterns, demand forecasting and peak into futuristic expectations of the consumers. The below mentioned graph is a representation of opportunities to leverage IT in the business environment.
A well-integrated ERP has a direct impact on the cost management too. The most important step in use of technology is ‘simplification’ of business processes. Currently, newer technologies are leveraged, over and above the legacy systems, for compliance and monitoring of processes instead of identifying redundancies in the process chain. Cleaning-up and elimination of processes results in saves in people. Moreover overheads cost should be the premise for technology implementation.
While we listed the effect on the top- and bottom-line with efficient use of technology, a critical aspect for using technology is control and mitigation of risk. This has a direct impact on stakeholder profits. Enterprise risk management, which encompasses risks of financial, operational, strategic, business environment, globalization, is either about dealing with foresight or reacting to disaster. Internal risk is primarily due to inefficient enterprise resource management, control weaknesses in business process, regulatory and statutory non-compliance, and delegation of authority. Supply and demand inconsistencies; competitors early move impact, geographical turbulences and government policy changes are part of the external risk factors.
Therefore, as defined earlier, technology provides the means or the actual solution through valid integrated of data to senior management tasked with mitigating risks. Measuring and monitoring risks, information sharing and communication with stakeholders regarding risk events, with use of technology enables effecting control activities and avoid future occurrences.
Chief executives of organizations sign-off on compliance, accuracy of financial statements, regulatory reports, stakeholder news and information based on established sources of data, which is primarily from the technologies within an enterprise. Hence, the effectiveness and efficiency of technology has a direct bearing on risk management process.
In brevity, leverage of technology is not just restricted to enterprise resource management but also to adopt cross industry experiences and best practices. It also help enterprises develop a social connect, acts as medium of communication with customers and stakeholder with inherent controls built in to detect, monitor, manage and prevent risk events.