Is There Such a Thing As a Lifestyle Software Business? |

A respected professional, Chris Knudsen, said something to me a few months ago that I have reflected on several times since that occasion. We were discussing a company that has amazing, break-through technology with a wide-open market space. Their leadership just does not seem to be in a hurry to seize the opportunity. They’re growing at about a 7% rate through the first 10 months of 2009, which is not bad in slow economic times, but they could be doing so much more. They were treating their business like a “lifestyle” business, but Chris said there can be no such thing.

Before I jump too far into this thought, let’s make sure we are on the same page about what a “lifestyle” business is. In essence, it is a company that is not designed to grow much beyond the means or capabilities of the founder(s). A small auto-mechanic shop or a 5-chair beauty parlor would possibly fit this definition along with millions of other businesses around the world. These businesses do not take a lot risk, where software and technology businesses have to continue to risk everything with each change in the technological marketplace. For example, the iPhone has existed for less than 2 years, yet if your software does not have an iPhone app, you are considered archaic.

Now, let’s get back to the software business. The owners are running it like a lifestyle business. They are not in a hurry to grow, and they are taking only a portion of their relatively minute profits and investing them back into improving their technology and infrastructure. They have little sense of urgency in sales and they are happy to bring on a few new accounts each month. Let me repeat – they have amazing technology that could completely redefine their entire market. However, if they do not act quickly, they will lose their opportunity.

Technology is changing at light speed. Every software company has a window of time to make their leap and make a run at their market. If they wait too long or become too complacent, they will miss their opportunity. In terms of a lifestyle business, if they only rely on their own means and they do not pull the resources together to take advantage of the opportunity, they will not only miss the opportunity but they will likely be out of business in 5 years or less.

Technology is changing too fast and they will not be able to keep up. The competitors will eventually find their way through the window of opportunity even though their technology is inferior and they under-serve the needs of their customers relative to the company’s technology. These competitors will be rewarded with enough cash and resources to adapt and stay ahead of the changing technology.

So, I ask this question: “Is there such a thing as a lifestyle software business?” I haven’t found one, but I’d love your feedback on the subject. In my experience with CFO WISE, I have not seen one yet.

Develop an IT Strategy to Maximize Business Value |

Businesses must develop a written Business Plan to succeed in today’s competitive business environment. A Business Plan defines the strategies and tactics for the business and provides a roadmap to success.

The same concept also applies to your Information Technology (IT). If your business does not have a documented IT plan – or strategy, your technology investments are likely considered a necessary cost of doing business instead of an investment that provides optimum business value.

Developing an IT strategy is a vital requirement for any size business. An effective IT Strategy defines the technology, people and processes necessary to meet business requirements.

More importantly, an IT strategy directly connects IT services with business processes, providing a framework that enables effective metric-based technology decisions in support of business goals and objectives.

In a previous article, I discussed key elements IT must provide to recognize value from your business investment:

• Align IT with business goals
• Provide critical business functions at high quality
• Deliver specified and measurable service levels
• Provide recommended risk mitigation tactics
• Maintain cost effectiveness.

Align IT with business goals. This is the most important element and becomes an impetus for an IT strategy that directly supports the business strategy.

An effective IT strategy clearly defines how all IT services and processes to deliver the services align with business goals. It also outlines a future state where your IT services directly contribute to the business sustainability and growth.

The strategy sets the foundation for aligning IT with the business, addresses the delivery of technology services and describes the costs associated with the delivery of those services. In summary, it provides a roadmap or blueprint for direct contribution to the success of the business.

There are several key issues to recognize and questions to address when considering a well defined IT strategy:

• How do we know if our IT services are aligned with the business?
• If IT is not aligned with the business, what is it costing us?
• How do we align our IT plans so that they directly support business objectives?
• How much will it cost?
• How will the IT strategy contribute to revenue goals?
• How do we know when our IT is aligned?
• How will we maintain alignment?

To develop an IT strategy, a comprehensive view of technology, people and processes will provide the greatest benefit.

Technology includes all business software required for your business, and also incorporates the overall network infrastructure and architecture to support the business software.

The people element consists of all internal IT staff and external IT resources you utilize. In addition, you must include all resources that contribute time and effort to IT functions. All direct and indirect costs are included.

Processes must include all business processes supported by IT – or that could be supported by IT. IT processes include all operational activities such as procurement, configuration management, change management, service and support.

There are several questions to consider in the early stages of evaluating and formulating a plan to develop an IT strategy:

• Is your technology meeting current business needs?
• Can your technology scale to meet the changing demands of the business?
• What are the key integration points and will they adapt and grow effectively?
• What is the most effective sourcing strategy for people and technology?
• What is the most cost effective means to deliver the quality and service levels required by the business?
• Are your processes fine tuned in all areas of IT operations?
• Are all technology and IT Governance risks accounted for?

Once you provide preliminary answers to these questions, you are better prepared to begin the strategy development process.

IT strategy development can be accomplished through the use of a four-step process:

1. Discovery – document the current state of technology, people and processes – including business processes
2. Assessment – assess technology, people and IT processes, establish and map out if/how each enables the business processes
3. Analysis – analyze the current state and potential desired future states
4. Formulation – develop solutions to reach desired future state

Implementation of the IT strategy requires substantial planning and depends on the size of the business, urgency and costs. The strategy is generally implemented over long periods of time on a priority/benefit basis.

The goal is to recognize incremental improvement. It is recommended to use a standard project delivery methodology to develop a plan and to manage the implementation of the IT strategy.

Developing and implementing an IT strategy will provide substantial business benefits. Maintaining a dynamic plan will help ensure your IT stays aligned with your business as your business grows.

A successful IT strategy will maximize business value and enable business growth.