The value of technology lies in using – not owning – IT
Companies cannot shrink their way to prosperity. Ultimately, successful companies need to grow profitably and IT has a key role to play here. When used to support business goals, IT can move beyond the realm of technology to become a true business enabler, improving competitiveness, reducing operational costs and accelerating that all important growth.
An idealised vision? Maybe, but you cannot escape the evidence that so many companies have grown very quickly on the back of a well-executed business model using IT as the key enabler. Where would most retail, financial services, Telco, media, travel and publishing businesses be today without a significant investment in IT? Not to mention the public sector where IT is being embraced in innovative ways to enhance productivity and service levels.
But the key is to get IT to work for your business – not the other way around. For many companies, the cost of IT can represent a significant investment, and it’s important to ensure that the necessary IT capital outlay and operational costs do not distort your business performance metrics.
These days, every major IT project needs to demonstrate a short-term return on investment (ROI). And when you’re planning for the future, this short-term focus can be a critical inhibitor of long-term profitable growth and value creation. After all, the objective should be to create healthy companies that generate lasting value for shareholders.
The importance of free cash flow
The cash that a company generates is a function of revenue growth, margin and asset productivity, and contributes towards ROI. More importantly, this cash is the lifeblood of a company and ultimately enables or inhibits business success.
Free cash flow is a major factor in the financial health of a company; anything that has a significant influence on this will necessarily impact that company’s ability to achieve its strategic and operational goals. So, it is worth examining the importance of IT as a factor that influences asset productivity and, consequently, has a significant impact on free cash flow.
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