Technology budgeting failures are typically quiet ones. It’s not that the software, cloud, or other technology investment wasn’t warranted or that the subsequent business-case didn’t justify the spend. The plan was just built on the license or subscription cost alone.
Treat Tech Adoption as a Capital Allocation Problem
Many technology discussions among leaders begin by focusing on the product: what it actually does, what it could potentially do, and how quickly competitors are beginning to adopt it. However, this is not the right approach. Instead, discussions should begin with the balance sheet.
In reality, the question we should be asking is not “which tool should we invest in?” Rather, it is “what issue are we investing to resolve, and what are the costs of not addressing it?” Unfortunately, the second part of that question, the opportunity cost of not taking action, is usually not discussed during budget meetings, even though it is critical. This is because every month that a manual process is still in use while competitors have automated it, the problem worsens.
Bring in External Expertise Before You Commit Capital
The easiest waste to avoid in IT project spend is trial-and-error planning. Buy a tool, try to force it into your process, fail and buy again, you just lost money and time you can’t afford to lose in a growth business.
The strategy a qualified firm doing ai consulting for small businesses will create for you is a map of where you are now, where you could be with some problems solved by technology, and a phased plan to get there. Nothing gets purchased until the last step of that plan, instead of leading you into a series of exhausting re-do’s when the next unplanned problem pops up in production.
Audit Current Systems Before Allocating a Single Dollar
First and foremost, before you sit down with a pencil and a spreadsheet program, do a complete audit of your existing systems. List those out first. Then list out all the systems that your team members use day-to-day. Look at every subscription. Examine your last three months’ worth of invoices. Talk to your managers about what they use that their reports don’t, and vice versa.
Before you spend a dime, here’s your goal: any money that you’re currently spending has to be for a system that your employees are actually using, that your management is seeing reasonable levels of reporting from, and that is built to directly fulfill a business requirement. If it’s not being used, if no one is looking at it, or if it’s a shiny object you’re hoping will eventually make a difference, it’s immediately on the chopping block.
Calculate the True Cost of Ownership, Not Just the License
This is where many a growing company routinely goes over budget. A software subscription fee is the tip of the iceberg. The invitingly simple-sounding second number, total cost of ownership, is what you ought to be contemplating. That includes training for your team, the actual data transfer from one system to another, your current and future technical advisors’ time spent figuring out your needs and the solutions, and even the kind of often overlooked costs like integration development necessary to hook your new tech up to all your other systems.
Change management makes a great pun in the context because it’s underestimated how often it is underestimated. You can’t just put something better in front of people’s faces and assume they’ll start using it. They’ve got to be onboarded, and that means training. And training means less productivity than you’d hope for a while. Better to plan for it than wail about it.
The switch from capital to operating expenses has made this less painful. With the SaaS model, you’re not cutting a monstrous single check that covers a new server or all the software in perpetuity, so it’s less cash out the door in one go. That takes the edge off.
Use a Phased Rollout to Manage Risk
It is risky and financially draining for a growing company to implement a large technology change in one go. Instead, a phased implementation is recommended. The risk is spread and, if you structure things correctly, the early-stage Return on Investment (ROI) from one phase can provide the money to fund the next phase.
Start by breaking the implementation into quarterly phases or milestones. Your first phase is your proof of concept (PoC), a small deployment that allows you to test if the technology (the tool) will, in fact, solve the problem it was purchased to solve. If the PoC works as expected, the early returns can help justify and fund the next phase.
If the PoC doesn’t work as you had hoped, you have at least contained your losses as you’ve not yet expended your full budget.
Prioritize Scalable Infrastructure Over Point Solutions
So you should now be ready to build what you currently need with twice your current team in mind. Software that fits your team perfectly today but requires a full replacement in two years isn’t a bargain, it’s a deferred cost with interest.
Is the deal you’re considering now such a good fit for your current budget that it would become tenable only if nothing at all inside your company changed over the next two years? Then it’s not a logical buy. You’re basically paying tomorrow’s price if you desperately need something today.
Here’s the question to ask: is the platform modular? And here’s a question that ties in closely to that: does pricing scale with growth in a reasonable way? A tool or a platform that skyrockets out of your budget once you’ve doubled your headcount or your data volume willingly becomes a bottleneck in your growth.
Don’t Confuse Enthusiasm For a Plan
What separates successful technology adopters from the budget burners is not so much the technology of choice. It is more about whether they made the entire adoption including the soft costs, phasing, integration, and training, a disciplined financial choice from the get-go. If the plan is correct before the contract is inked, the implementation tends to follow suit.
