Legacy tech is dragging down our mid-sized businesses – Forrester

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Peter Griffin

We’ve heard it so many times over the course of the last 18 months - the pandemic has sparked a wave of digital transformation in businesses, the likes of which we’ve never seen before.

That reality can’t be denied, it is reflected in the record profits large tech providers have reported this year. But while many companies have invested in technology to serve their customers and enable remote working during the pandemic, many continue to operate on ageing and inefficient core systems that are costing them time and money in lost productivity.

The problem is particularly pronounced in the so-called “mid-market” segment, companies with 20 – 500 employees. A new study by Forrester Consulting, which was commissioned by accounting software maker MYOB, surveyed 420 mid-market businesses across New Zealand and Australia and found:

Five key takeaways from Forrester’s study:

– Kiwi employees waste an average of 12.5 hours each week on manual or repetitive tasks due to ineffective digital solutions. That equates to $2.2 million per business per year for a firm with 110 employees.

63% of businesses across New Zealand and Australia admit their manual systems have held them back from taking on larger customers.

– Of the businesses surveyed, 38% still had on-premises financial and accounting systems, 60% had payroll systems that were yet to move to the cloud and 53% had on-premises asset and inventory management software.

– More than a third (35%) of mid-market decision-makers currently face significant challenges in tracking key performance indicators.

– Decision-makers reported an average of 28% in extra costs due to inefficient and/or ineffective business and people management solution capabilities.

Our productivity gap

We have a longstanding and acknowledged problem with productivity in New Zealand. As we get better at producing things, we should be able to get more value from the same effort we are putting in. But that isn’t happening.

Our output per hour worked is about 40% below the average of the top half of OECD countries. The limited gains in productivity we are experiencing are largely down to us putting in more effort through working longer hours. That clearly isn’t sustainable.

The pain points mid-sized ANZ businesses identify

Source: Forrester

The Productivity Commission is tasked with finding out how to get productivity advancing more rapidly and while the mix of factors involved are complex, our patchy take-up of transformative technology has been flagged as being part of the problem.

“Recent research suggests that New Zealand firms are not making the most of leading technologies and that global best practices do not flow swiftly into the New Zealand economy,” the Commission points out

“New Zealand firms are a long way behind the ‘international frontier’ (ie, the performance levels of the world’s best businesses). For example, New Zealand’s leading firms appear on

average to be less than half as productive as top firms from countries such as Belgium, Denmark, Finland, the Netherlands and Sweden,” it adds.

Our manufacturing and agricultural sectors are looking at how automation, robotics and data analytics can improve their productivity. For the bulk of our mid-sized businesses in the service industries and retail, digitisation has a big role to play in boosting productivity, particularly as we look to recover from Covid-19.

“Understandably, the current focus is on revenue-generating activity – but this is precisely what businesses are missing out on by letting inertia take hold when it comes to upgrading their business and people management solutions,” says Jo Tozer, Head of Customer Service – Enterprise, at MYOB.

Tech-savvy firms grow much faster

According to Forrester, firms with “future-fit business management platforms and practices” grow 3.2 times faster than their industry peers. So there’s a competitive edge in having systems in place that boost productivity. 

Of the companies polled, 42% reported experiencing a positive impact on employee productivity within six-to-12 months of adopting a “modern people or business management solution”.

The barriers to change

Source: Forrester

The costs of not having the best fit-for-purpose technology in place is very real.

“As it stands, 63% of businesses across New Zealand and Australia admit their manual systems have held them back from taking on larger customers, and this is another negative outcome from siloed or legacy solutions that is hitting their bottom line,” Tozer points out.

So what’s holding our mid-sized businesses from investing in what they need to be more competitive?

The cost of procuring and implementing new technology and systems is certainly a turn-off according to the research. Changing a finance, payroll or business management software platform is also a daunting task that many companies just put off in favour of the status quo.

That inertia to change, coupled with a lack of awareness around how software platforms relate to achieving a firm’s business goals 

“We believe the findings show that many leaders are unaware of the very real link between their operations software and achieving business goals, so senior decision-makers must take charge and illustrate how the wrong digital solution can waste time, negatively affect sales growth, result in extra costs and create poor customer experiences,” says MYOB’s Tozer.

“Too many New Zealanders are currently working harder, not smarter and it’s costing businesses significantly. This is an area that has just as much of a commercial case for business change and investment as any other area does,” she adds.

What’s the answer?

Implementing fancy new software isn’t in itself guaranteed to boost productivity. As researchers have pointed out, the last 20 years, a period of rapid advances in software development and the rise of the software as a service (SaaS) model, hasn’t fueled a major across-the-board jump in productivity, no matter where you live. 

The issue is that business processes, culture and management are replicating the same siloed and unproductive ways of operating in new software-driven environments. Our mid-sized firms need a new approach if they are to become more productive and therefore better able to compete locally and in export markets.

Here are Forrester’s four recommendations to begin bridging the productivity gap: 

Seize the advantage of a unified approach.

While leadership awareness and change management effort are key challenges for decision-makers, these challenges can be overcome. Communicate the cost of using outdated business and people management solutions and highlight the positive impact modern solutions have on productivity, collaboration, and business growth at your organisation.

Build a case for change that highlights the tangible impact on productivity and growth.

Mid-market organisations are the forefront of innovation and industry change. Unify operational practices and internal solutions to enable visibility and collaboration across the business. This will allow your business to leapfrog over competitors. But a business case for change must be based on economics, not emotions. Develop a case that focuses on the value of business agility, operational excellence, and employee productivity.

Select a solution that addresses the demands of modern digital commerce.

The pandemic has reinforced the importance of adaptability and widened the realisation that functions and decision-making are interconnected.

Invest in a unified platform that leverages cloud-first agility and security, enables business and IT collaboration, and provides dynamic upgrades and consolidated reporting capabilities. Your organisation needs a contemporary solution to meet the needs of customers and employees alike.

Embrace an employee-centric solution strategy.

Unintuitive solutions negatively affect productivity. So, it’s critical that you select a solution tailored to your industry’s unique needs, but is also easy to use and intuitive. This will help employees make timely, informed, and effective decisions delivering productivity improvements that will save your organisation millions each year.

Download the Forrester study Seizing Advantage: The technology pivot ANZ businesses must make.

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Peter Griffin

Peter Griffin has been a journalist for over 20 years, covering the latest trends in technology and science for leading NZ media. He has also founded Science Media Centre and established Australasia's largest science blogging platform, Sciblogs.co.nz.

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