Welcome to the third edition of BUSINESSBOOST — the latest in a series of business briefings from Blue Stone Business Solutions, a specialist and independent information technology consultancy business.

With the global credit crunch biting hard, businesspeople know that they have to be more agile and resourceful than ever to survive. Some respond to these pressures by working harder and for longer hours, others by reducing their prices to win more orders as market conditions get tougher. While these strategies can often bring some short-term gains, they often are not sustainable over the longer term. If you burn yourself out or everyone else reduces their prices, resulting in a downward spiral, you could end up back where you started.

So how do you get the most out of your information systems investment and expenditure? This is what we have covered in this issue, which we have described as going beyond mere cost control.

We have spoken in previous issues of the newsletter about how every aspect of an organisation’s IT strategy and operations fits into the diagram below and how, as the business and its information systems evolve, the emphasis changes over time between the core elements. At other times it may also prove necessary to deploy the ancillary services around the periphery to keep everything running smoothly. But for this newsletter we want to ‘break out’ of our schematic and focus on how you can bear down on costs, and resist the upward cost pressures in your day-to-day operations by bringing as many of these services into play as are necessary to achieve your objectives, either singly or in conjunction with one another.

The danger is that if you don’t change your business model you can find yourself working long hours for very little reward. As you read and watch the news, the headlines are filled with doom and gloom about the world economy and the UK financial sector, with major UK banks being virtually nationalised left, right and centre. For other sectors the picture is also far from rosy. Yet despite all this, some industries in general, and some companies in particular, are managing to thrive in this challenging marketplace. At Blue Stone we have therefore reviewed with our clients how the global downturn is affecting IT departments across various industry sectors.

In a recent business survey, 90% of the 500 companies that responded believed that the credit crunch would affect their company’s decisions to invest. Despite this belief, 45% felt their company had so far not been affected by the current state of the economy. This differs significantly industry by industry. At the next level, only 25% felt that IT departments would suffer more than other departments in their company. The key areas of concern are that 15% felt that software investment will see a decline, 8% will see a decline in hardware investment and 40% felt that manpower will also be impacted substantially. Due to a lower budget for IT departments, 80% of end users believe that their companies will look to lower cost solutions, such as outsourcing IT activities and open source software. However, this is mainly echoed by professionals in large corporations as only one third of SMEs feel that their organisation’s budgets will seek lower cost solutions. Many companies believe there will be a reduction in training and there will be fewer projects undertaken by the IT department.

So if it is not all about simply cutting costs or seeking lower cost solutions, what is the answer?

Reducing working capital during the credit crunch

Blue Stone is ideally placed to help you reduce your IT running costs using traditional methods such as:

• reviewing and restructuring your IT department
• identifying lower cost solutions to existing facilities
• prioritising business/development needs
• reducing expenditure on purchases of hardware, software and associated maintenance
• re-negotiating supply deals including professional services and outsourcing arrangements

But sometimes you have to spend money to save money. Recently we have been helping clients to acquire and implement systems designed to provide a greater insight and analysis of financial data — so-called business intelligence systems. These systems can drastically reduce reporting timescales and provide vital information more quickly and more accurately. Modern software can provide the means to analyse information in diverse ways often exposing hidden trends and factors. Perhaps unsurprisingly we have also been helping our clients to select and implement systems designed to collect cash quicker and more efficiently from customers. These systems can be particularly effective in reducing working capital requirements, reducing bad debt and reducing risk — all particularly important in today’s uncertain climate.

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When we look back on the numerous projects we have conducted over recent years, we have invariably been able — in a relatively short period of time (often as little as one working week) — to identify significant scope for improvement in our clients’ processes. Once these have been redesigned and new systems subsequently introduced, there have either been marked efficiency improvements and/or reductions in cost.

Because we are confident of our ability to review the position and come up with practical, cost-effective solutions, we are willing to undertake an initial exercise for you at 50% of our normal rates†. However, in case you’re wondering if this is just some hit-and-run marketing strategy, then you should know that we tend to work with all of our clients over the long term, often working alongside them over many years. Businesses tend not to do this unless there are sustained improvements, and this is precisely what we aim to deliver. But don’t take our word for it, talk to one of our many satisfied clients, a number of whom will be able to tell you about their dramatic improvements in systems capability or significantly reduced IT costs as a result of our involvement. Immediately below we have described two scenarios where such benefits they gained from our input.

†This offer is limited to the first 10 days of services provided and is only available for the initial project with a new client.

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the objective isn’t always to save cost, but this is usually an outcome

Here are two of our recent projects where efficiency and cost savings have been achieved:

When the IT Director of our first client, a major distribution company, asked us to restructure his IT department to ensure it was more customer-oriented, we hardly thought that cost savings would be one of the major outcomes. As part of our project we reviewed not only its staffing and how the entire department operated, but also contracts with third-party service providers. As a result of our initiatives the department was restructured so that it was more efficient but we were also able to identify significant savings both within the client’s IT operation and also from third-party providers. The result: a more efficient department, providing a better service to the business but with significantly reduced running costs.

Another blue-chip client active in the construction industry was seeking a solution to collecting cash from customers quickly and efficiently. This client’s business was characterised by high volumes of low value invoices — a particular challenge from the cash collection perspective. We helped with the selection and implementation of a system designed to collect cash faster and with less resources. Small improvements in debtor-day performance returned huge sums of cash into the business, freeing up vital working capital and reducing risk.

Costs, especially IT costs, can build up in any business and this is especially true in the ‘good times’. When business is going well initiatives are not always focussed on getting the most out of every penny. But in today’s economic climate there must be a ruthless control of costs. Our experience of negotiating contracts with IT suppliers can be leveraged to great benefit, while our broad experience of helping companies to be good buyers of Information Technology gives us the knowledge and experience needed to target areas where cost can be saved.

The experience of the two clients above is typical: identify where the cost pressures are, whether each facet of IS expenditure is generating the maximum ‘bangs-per-buck’, and how cost can be squeezed out of the system without jeopardising overall business performance.

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Next month’s newsletter deals with system acquisition: how we help our clients to specify and select complex business systems in a low-risk fashion.

In the meantime, if the examples above strike a chord with you, and if reducing your IT running costs or improving your working capital through the use of information technology is of interest please do not hesitate to contact me, either by phone [0121 285 5000 — then key 1 to speak to me personally], by e-mail [plovett@bsbs.co.uk] or by clicking here. I look forward to hearing from you.

Finally, if you missed (or have mislaid) last month’s newsletter then you can access it on our website by clicking the previous link at the top of this newsletter.

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Copyright © October 2008 Blue Stone Business Solutions. All rights reserved.