TechTalk Blog: Decentralization of IT for SMEs and the Rise of Managed Services

By Brad Monterio posted 06-12-2015 02:24 PM

  

In business, we have learned that centralizing key functions, including accounting and finance, are crucial to efficiency, risk management, and control, among other things.  After all, it probably doesn't make sense if each team conducted its own accounting or designed and managed its own budget without a link to the overall, central ERP system and budget.  Things could quickly get out of control.

However, an interesting trend is taking place now among small to medium sized entities (SMEs) – albeit nothing new for the largest of companies – that involves somewhat of a decentralization of information technology.  The IT department is no longer the sole control point for managing the organization’s technology spend.  According to a recent 2014 study done by Vanson Bourne on behalf of CA Technologies, “the transformation of technology from a centrally managed IT responsibility to corporate-wide business enabler is upending the enterprise and reshaping the way technology is purchased, deployed and used.”

This is catalyzing transformation of how SMEs acquire and deploy technology, and it is causing the role of the IT staff to evolve as well into that of a strategic advisor.  As management accountants become more technology savvy, I would argue that they too (as CFOs, Controllers and other finance professionals) have the same opportunity to influence the company’s investments in IT.

The pool of 1,300 IT executives in 21 countries polled in the study indicated that “over one third (35%) of IT spend is now happening outside of the IT department,” and that they expected “this trend to continue with lines of business responsible for 44 % of IT spending within three years.” 

With the advent of the cloud and managed services, this is no surprise.  As Joseph Howell indicated in this month’s SF Magazine feature article, “Moving to the Cloud,” the accounting profession is increasingly turning to cloud-based solutions to improve efficiency, lessen the impact on the IT budget, streamline processes, and increase productivity, all with the swipe of a credit card.  A swipe that is more and more taking place outside the IT department on a laptop in accounting, finance, marketing, sales, operations and other departments.

Perhaps very telling is how these IT spends are being used outside of the IT department.  According to the study, non-IT business decision makers have “reversed the historical mix that showed as much as 80% of IT budgets typically allocated to maintenance activities. Today, the total enterprise spend on IT across all functions and units has moved from maintenance or “keeping the lights on” activities to a heavier concentration on new services development and deployment.”  In other words, the focus is on applying technology in more innovative ways to the business, opening new markets, adding new customer segments, and much more.  This is not about replacing laptops or powering server farms.  Much of this new spend is taking place in the cloud.  The survey respondents indicated that current spend levels are “nearly [evenly] split today [between maintenance and non-maintenance activities] and expect the balance to shift in favor of innovation—to 59%—in three years as buying power continues to increase outside of central IT departments.” 

This speaks volumes about the ease with which the cloud has empowered SMEs to update their technologies with less concern about costs, integration, upgrades, updates and other typical IT concerns in the offline world.  Mind you, these don't completely disappear – nor do any key risks like cybersecurity – they simply evolve to fit the medium, in this case, the cloud.

With the increasing importance of IT to the role of management accountants, CFOs can have greater influence over the strategy behind such decisions to purchase IT solutions in a decentralized manner, balancing flexibility and the other benefits with risks.



#strategy #IT #SMEs #managedservices #SME #finance #budget #technology #Accounting #tech #efficiency #TechTalk #cloud
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06-13-2015 01:02 PM

As against the traditional view of decentralisation of IT activities, current trends in the same augur well for a better role of Management Accountants for SMEs in the context of increasing access to cloud computing by SMEs. At the decentralised ( functional level ) , Management Accountant should act as an enabler in creating an entrepreneur -perception for taking decisions both financial and non financial . That would bring in required integration from Corporate point of view.