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Cost-Effective IT: The Business Process

Cost-Effective IT: The Business Process, by Richard Sonnier

Houston Business Show "Advisor" Richard Sonnier, of the Information Technology Services firm Nimble Services, Inc., provides weekly information on our show about business technology issues. He can be reached at 281-445-4800 x250 or rsonnier@nimbleservices.com.

Last week, I reviewed the basic questions of cost-effective IT. This week I will explore the role of the business process in deploying technology in your business.

In any business process, there are three components:
1. Items to be processed called inputs.
2. The activity of transforming the inputs into finished products called processing.
3. The finished products called outputs.

When considering the application of technology to the process, identify one or more of the components to be improved. There are number of ways technology can improve these components. At my company, we assess the effectiveness of an new technology for our clients by asking the following questions about the business process:
1. Will the process be faster using the technology?
2. Will the process produce more output in the same time or at the same cost using the technology?
3. Will the process operate at a lower cost using the technology?
4. Will the process be an innovation using the technology?

Let's see how these might apply to a simple example. Suppose a manufacturing company is considering the purchase of a $40,000 simulation system for its engineering department. Currently, new engineering designs must be manufactured as prototypes and then tested to verify they meet customer requirements. The simulation system can test the new designs in software avoiding prototypes costing $2000 per month.

Over two years the company avoids $48,000 in cost with the new IT. That is not a great return on the $40,000 investment. Is there any more? Let's go through the questions.

Faster? Using the simulation software, engineering can work on twice as many designs as the old process so the process is 50% faster.
More? Output is doubled.
Lower Cost? If we tried to double output under the old process, it would cost $96,000 so the real saving is over 100%
Innovation? Using the simulation software, engineering can work on designs beyond what we could prototype in house resulting in breakthrough products.

One word of caution the assessment could show that the new technology is a bad idea. Do not get caught up in the hype. Next week, I will continue this discussion with the dark side of IT.

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