How Small Businesses Can Make the Most of their Small IT Budgets

    September 8, 2016

    By Scott Adams

    Smaller budgets should not keep IT SMEs from investing in new technology and hiring new staff. With capacity planning software and creative FinTech financing solutions, companies can make the most out of limited capital.

    The recession’s effects on the IT world are still being felt today. During the crisis, fear of rejection from banks led many small business to stop using credit. This lack of credit, coupled with increased regulation and capital costs for loans, is now making it difficult for IT SMEs to receive capital investment from traditional lending structures.

    In addition, SMEs are generally high-complexity, low-reward investments, since they involve the same intricate organizational structures as larger enterprises without the same financial returns; this further dissuades banks from investing in SMEs.  

    In the face of such difficulties, many SMEs seeking to optimize their small budgets are avoiding financing solutions altogether, preferring to directly pay for any new investments. But this is not a long-term solution: to keep up with an aggressive marketplace, IT SMEs need new investments and new recruits, and this can only occur through engagement with financing solutions. Luckily, there are ways for small business to expand and optimize their limited budgets while investing in new technologies.

    Prudent organizations will take a two-pronged approach, centered on tapping the burgeoning FinTech marketplace while employing capacity planning software to optimize spending efficiency. These two prongs can help any IT SME invest in new business opportunities while getting the highest possible value out of their existing resources.

    FinTech Solutions

    The World Economic Forum recently released a report titled, “The Future of FinTech: A Paradigm Shift in Small Business Finance.” The report details the opportunities for FinTech (Financial Technology) to assist small businesses with limited budgets and few traditional financing options. They write: “FinTech embodies a new set of products tailored to the needs of small businesses. These include marketplace (“peer-to-peer”) lending, merchant and e-commerce finance, invoice finance, online supply chain finance, and online trade finance.”

    Of the total investment in FinTech, 16% has been directed toward business lending companies such as OnDeck and MarketInvoice. SMEs should engage this growing finance market to explore new funding solutions to their business needs.

    Out of the existing FinTech financing options, SMEs should most rigorously pursue marketplace (peer-to-peer) lending. Marketplace lending diverts lending opportunities away from traditional financial structures such as banks. While banks have proven wary of lending to high-complexity, low-reward IT SMEs, marketplace lenders generally source capital through investors with a higher risk appetite. In addition, these lenders need not comply with the same level of regulation as banks, increasing the odds of their lending to a higher-risk SME. Lastly, marketplace lenders often use data-driven, advanced credit scoring models that should benefit SMEs, whose lack of credit has traditionally dissuaded banks from lending to them.

    Capacity Planning

    In tandem with the aforementioned financing solutions, SME’s should spend their capital more efficiently by investing in capacity planning software. Capacity planning software allows companies to cost-effectively optimize their use of IT resources and manage scalable spending services such as cloud computing through predictive analytics. For instance, TeamQuest’s analytics packages anticipate future workload needs and prepare for usage spikes. Our capacity planning software can lead SMEs to more efficient service and better budgeting decisions, freeing up capital for investment in new projects.

    Our package has been proven to work. Working with a financial services company, we automated 70% of analysis, reducing staff time by more than 95% per report. This allows SME staff to spend their time analyzing and acting upon reports, rather than exhaustively creating them in Excel.

    In the growing world of cloud computing, capacity planning is all the more necessary. Despite the promises of efficiency made easy, cloud computing can often lead to increased financial waste, as companies without sufficient IT staff overspend on unfamiliar technology. As co-founder and chief technology officer of Cloudyn Ltd. Boris Goldberg maintains, roughly 60% of cloud software servers can be reduced or terminated because companies have bought too many.

    Clearly, for an SME with limited budget, such waste is unacceptable. Once again, capacity planning software can help companies avoid this overspending through advanced analytics designed to limit inefficiency and redundancy.

    For the time being, many SMEs must still deal with limited budgets, but with capacity planning software and creating FinTech solutions, IT companies can expand, invest, and experiment.

    Category: it-budgeting