Fast reactions on demand

On-demand business practices are helping larger companies to lower costs, increase efficiency and uncover hidden value in the organisation. It is a way of running your company faster and more efficiently, focusing only on the activities that build value.

Engineered for change so they can sense and respond to shifts in the market – whether they come from customers or competitors – on-demand businesses are in a better position to be responsive and ready for anything.

According to Teresa Jones, senior research analyst at Butler Group, there are two aspects to being an on-demand business. ‘Part of an on-demand business is the ability to respond quickly to changing requirements, and to do that you have to have good procedures in place that are followed by everyone,’ says Jones.

‘It also has to be easy to change things internally – otherwise you will not be able to deliver your services in a new way, when required.’

Small and medium-sized enterprises (SMEs) are increasingly looking for ways to improve their performance and compete successfully in a busy marketplace, and evidence suggests that these companies are in a position to take advantage of on-demand business practices.

Competitive pressure is the most significant driver, according to Jones, although reducing the cost associated with doing business and increasing margins are also key factors.

For many small businesses it is the ability to expand and grow without having to consider spending significant amounts of money on technology. Many suppliers, recognising that funding IT growth is a potential barrier to its adoption, are starting to develop innovative and more accessible funding methods, such as lease equipment and applications, which reduce the capital outlay and potential cash-flow problems suffered by a range of small businesses.

For small companies the option of buying computing services as a utility, in the same way as gas and electricity, is finally becoming a reality.

The utility application service provider (ASP) model for acquiring computing services, as adopted by confectionery specialist Rococo Chocolates – see case study, p38 – works well for the SME sector because it reduces the initial financial outlay and technical requirements.

‘Using NetSuite as a hosted application offered us the easy option of internet working, a lighter hardware investment and no hidden costs for software upgrades, plus it did not require employing an IT specialist, buying networking kit or managing data back-up – the quote alone for a five -station network alternative was £30,000, which, in the end, we did not need to spend,’ says financial controller Gerry Kerins.

The on-demand journey can be a tough one, especially if your business has already recognised the advantages of using technology and made significant investments.

Improving processes is what an on-demand business is all about, and employing technology is a fast way to enable and automate business processes. However, the ultimate success of the implementation will depend on the way that the business is transformed, and integration is essential to such a transformation.

The power of on-demand business lies in its ability to break down barriers, speeding the flow of processes and information within an organisation. While on-demand integration usually begins within the company, it can expand to include the businesses you work with – both customers and suppliers. The theory is that the wider it goes, the bigger the benefits.

Achieving the high levels of integration may not be so easy for small businesses that have already bought technology to manage individual processes.

Ian Charlesworth, senior analyst at Ovum, offers advice to firms with legacy IT systems.

‘If you are overly committed to maintaining those systems, then that will limit your ability to invest in new technology, which allows you to do som ething different. Therefore, you need to streamline those costs so you have money to spend on the things that will support on-demand processes,’ he says.

Attempting to integrate a standalone finance system with an independent sales and marketing suite, while adding purchasing functionality or logistics, might prove to be an expensive or overly complicated task. If you have no need to complicate it, do not do it because it is going to get very expensive very quickly, is the advice from Derek Kay, director for ebusiness and hosting services at IBM.

Nor should you underestimate the issues surrounding integration, says Butler Group’s Jones.

‘The problem of integration will not go away in an on-demand world,’ she says.

‘Integration between different applications essentially requires a good understanding of both the source and the target applications, as well as any technology layers that may be in the middle. The challenge is to make sure that applications are well integrated to avoid issues such as duplication of data entry.’

In a recent independent survey of 400 small businesses, the use of technology is now seen as an essential element in building a successful business.

Small businesses are prepared to invest in high-performance, advanced technologies that have a major impact on business productivity and competitiveness.

Moreover, small businesses in the UK are becoming aware of the importance of intellectual capital and are prepared to use advanced technologies to engage in the competitive arena with much larger players.

According to the survey, high technology take-up translates to an annual technology spend of £62,500 for most small businesses. However, the research also revealed that one in 10 businesses employing an average of 116 staff is spending just £7,000 on technology each year. This is just £60 per employee, leaving the business under-resourced.

But unsurprisingly, financial

businesses are the biggest spenders, with 55 per cent of respondents spending more than £100,000 a year.

Rapidly expanding financial management firm Millennium Global Investments recognised that to enable it to scale its business it needed to streamline its reporting, internal analytics and data processing.

Richard Macaskill, global IT strategy manager, says adopting an integrated business intelligence (BI) package and developing an in-house IT facility has helped to grow the business.

‘For eight years we muddled along using spreadsheets and ad hoc reporting tools, managing about £3bn of funds,’ he says.

‘But since adopting an integrated approach towards technology and deploying business intelligence software from SAS we have tripled the business. We now manage about £10bn of funds, largely because we can concentrate on our clients and the complexity of our business, instead of having to continuously glue together the pieces.’

The options for small and medium-sized businesses that want to develop on-demand processes will depend on the size, ability and focus of the business. Those firms wishing to keep their information systems close at hand may choose to manage and maintain their IT systems and applications in-house, while those with little or no IT expertise will welcome the hosted services of an ASP.

The good news is that the major application providers have recognised the potential buying power of SMEs and are developing versions of their products aimed specifically at the small business market.

Expect to see more ‘lite’ versions of applications – with the lite often referring to the amount you pay, rather than a decrease in functionality. Also expect to see more hosted versions of applications, as well as more creative licensing and finance options aimed at reducing the cost barriers to adoption.

But to succeed and change their working practices to adopt on-demand processes, SMEs do not necessarily need the latest, leading-edge technologies; last year’s, tried and tested and much less expensive technology appropriately deployed can deliver just as much benefit.

‘Staying one step behind the curve can be a useful strategy, especially in the application space’, says Charlesworth.

Price moves on-demand pitch

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