Why is the involvement of external IT partners by digitalization transformation highly relevant for SMEs?
Digitalization has long arrived in the business area of small and medium-sized enterprises (SMEs). Nevertheless, it still causes immense problems. These are mostly related to the available resources: Budget, know-how, employees and an efficient strategy are particularly critical factors here. In the following, we outline the challenges that SMEs must or should master in the course of digitisation and describe an economic approach to solving some elementary difficulties in the form of external local IT partners.
The challenges of digitisation for SMEs
Basically, all of the following digitization challenges relate to the respective company. For the further course of argumentation, however, it must be borne in mind that many of the measures that follow after these basic steps have been mastered, cannot be handled completely and efficiently within the company.
The assumption of digital change
The first challenge for digitalization in the SME sector is usually the "simple" acceptance of the indispensability of an increasingly digital orientation by the managing director or the owner of the business. In recent years, there has been a major rethink in this area. Nevertheless, a considerable number of companies still have a lot of catching up to do.
In this context, an understanding must be developed that digital transformation does not only affect the purely technical aspects of SMEs. In plain language, this means that, as a rule, the business model and the organisation must also develop further with digitalisation. Only when it has been established that the digital conversion will (at best) have an effect on all areas of the company, can a strategy be developed with which it can be carried out as successfully as possible.
Major expenditure in SMEs often relates to new machinery and equipment. By comparison, the optimization of the digital orientation is rather classified as secondary - even if many managers are aware of its relevance. This is not infrequently due to the fact that the first mentioned goods are seen as investments, while digital services are primarily seen as expenditure. However, SMEs should also regard expenditure on the digital transformation of their business activities as a useful investment. The business model and value creation of an SME can develop very positively if the focus is set correctly.
Processes become leaner in all relevant areas, which can lead to significant cost reductions. Customers can be reached better and served more efficiently, which tends to increase business loyalty. And it is also possible to address other target groups in a relatively uncomplicated way, thus immensely simplifying the acquisition of new customers. In this regard, it should be noted in conclusion that insight into the broad benefits of digitization and its recognition as an investment good are indispensable in order to take the appropriate steps with the greatest possible success.
The right digitalization strategy as an indispensable basis
As a rule, entrepreneurs have no difficulties in realizing new projects effectively and quickly. With regard to digitisation, however, the situation is different. According to a study conducted by the Institute for Quality Management and Applied Business Administration in cooperation with Comitas AG, only just over 50 percent of German-Swiss SMEs have a corresponding strategy. Among other things, this is the result of the fact that many companies and those responsible for the digital orientation exclusively rely on their own - often rudimentary - experience as digital consumers.
The specialist knowledge that is absolutely necessary to define an economic strategy and a highly successful implementation concept is often lacking. For a holistic digital orientation, however, it is essential to consider all the intricacies of the interplay of specific digital competencies, the respective business model, the development of the company and the technology as such - in other words, to assume a truly comprehensive strategic basis.
Sufficient involvement of employees
Digitisation is often equated with the destruction of jobs. This is one of the main reasons why it often meets with resistance from employees. Since the structures in SMEs are less low than in large companies, such internal resistance can contribute greatly to the failure of digital transformations. But the obvious disadvantage can even become a significant advantage.
Since SMEs are often owner- and family-run, the confidence of the workforce is often high. If managing directors and owners openly deal with a planned digitalization, there is a high probability that the employees will support it without restrictions. The digital transformation also offers the chance of an even stronger cohesion or a general improvement in the working climate.
The development of digital competence
Another major challenge is the development of internal digital competence. This does not necessarily refer to the concrete, sole implementation of corresponding measures, but first and foremost to the understanding of relevant relationships.
- The company needs to understand how digital technologies affect all business activities.
- From this knowledge, it must be possible to derive relevant measures and strategies for digitalization in each specific case.
- Likewise, the tools and methods for implementing the digital project must be optimally understood.
Larger companies and corporate groups have the opportunity to invest a lot of money in setting up their own departments to create the digital basis and to carry out subsequent processes, which of course does not apply to SMEs. As a rule, they are dependent on the digitisation agenda being implemented at least in part by an external service provider.
Market study reveals: Many SMEs are aware of the relevance of digitalization, but there are still deficits.
Digitalisation is also making inexorable progress in the field of small and medium-sized enterprises. It should be fully taken into account from the arguments outlined in the previous sections.
The Institute for Quality Management and Applied Business Administration (IQB-FHS), in cooperation with Comitas AG, has recently conducted a study dealing, among other things, with coping with the digital transformation. The results of a qualitative survey of 100 SMEs in German-speaking Switzerland conducted in spring and summer 2019 are summarised here.
You can find and download the complete study under Comitas market study digitalization
As a result, German-Swiss SMEs are fully aware of the opportunities offered by digitalization. In fact, 95 percent of those surveyed said that they regard the associated processes as positive. In addition, the respondents agreed that digitalization will not have any negative effects on their respective competitive positions. Only 5 percent expressed reservations in this respect.
Accordingly, as many as nine out of ten companies have an IT manager who supervises the relevant processes. However, only 70 percent of SMEs have a representative. This illustrates, among other things, that a large proportion of small and medium-sized enterprises still do not give digitalization the manpower it actually requires. Frequently, there is actually no team, but only one person in charge who has the complete know-how.
One of the main reasons for not having a proxy or even several people responsible for specific areas of digitalization is the mostly strong operational orientation of SMEs mentioned above. The focus here is primarily on the core processes, i.e. the classic production and sales sequence.
The following central risks arise if there is only one person responsible for digitalization:
- Should the IT manager become ill or resign for a longer period of time, there will be no employee to take care of the IT work to be done.
- If a single employee is entrusted with all digitalization processes, the risk of operational blindness increases - as a rule, several managers or a team not only proceed more efficiently, but also more proactively with innovations.
- Due to the increasing complexity of such processes, a single IT manager is usually no longer able to fully manage the administration.
The cost saving factor is often particularly decisive when it comes to going without an IT representative. If, however, you counteract the risk of a malfunctioning IT system mentioned first, the benefits of this approach are likely to quickly become relative. If hiring an in-house IT representative or appointing a team is not an option, there is only one possible solution to ensure sufficient capacity: a partnership with an external IT service provider.
The solution: external local IT partners
The use of external IT service providers is becoming more and more common. Even SMEs are increasingly recognizing their benefits. In addition to the risks mentioned in the previous section regarding the absence of an IT representative or IT team, there are many other clear reasons for working with an IT partner or IT Managed Service. Some of them are presented below.
The costs are precisely determined before cooperation with an external IT partner and can therefore be planned within the budget.
Eliminating training costs
The digital business world is a fast-paced one, and professionals need continuous training to keep abreast of the times and maximize your company's profits. When outsourcing, you don't have to pay for it yourself.
You get real experts
If your company is not itself an IT company, you may not be able to assess the qualifications of a new IT professional as well as someone who deals with them on a day-to-day basis. As you prepare for the job, the service provider of your choice will provide you with sufficient advice and, ultimately, the right experts who can respond to your needs with sufficient experience.
IT service providers specialize in IT support for other companies. The bundled competencies and many years of experience lead to a working efficiency that you can only achieve with a specially assembled team at great expense.
Fast implementation of new technologies
Since an in-house IT team is usually busy with day-to-day business, there is a lack of capacity for innovation. In most cases, there is simply no time to get involved in new opportunities - and to be trained for efficient implementation. Training is accompanied by tests and constant adaptations, which can sometimes take years. An external IT service provider not only has the necessary capacities, but also the necessary know-how to help you achieve success quickly. This is exactly what these companies live on.
You concentrate on your core business
In every company there are only limited resources in terms of time and manpower. This applies to both employees and managers. Handing over certain IT activities to an external partner helps you not to burden yourself and your valuable employees with tasks that are outside your area of competence and can therefore damage your core business in the long term.
Like any investment, hiring one or more IT experts involves certain risks. However, if you outsource IT work to an external partner, you can keep those costs significantly lower. Of course, you also have to pay for the work in this context, but there is no need to create the necessary framework knowledge. The service provider will take care of special industrial and security requirements etc. for you.
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