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Technology innovation versus ROI: Striking the business balance


Johannesburg, 01 Mar 2024
Enterprises worldwide are realising that robust digital infrastructures are essential.
Enterprises worldwide are realising that robust digital infrastructures are essential.

In today's fast-paced digital world, technological advancements have revolutionised business operations, prompting enterprise businesses to embrace digital transformation at an unparalleled pace. 

Businesses face the dual challenge of seamlessly integrating technology, while needing to showcase tangible return on investment (ROI). 

Steven Sutherland, Divisional Executive of Adapt IT Telecoms, sheds light on the need to find the balance between technology innovation and integration, ROI measurements and the collaborative strategies that could assist businesses in truly showcasing the value of these technological advances in the digital era.

Driving business evolution: The accelerated pace of digital transformation and technology innovation

The rapid evolution of technology in the digital era has reshaped the business landscape, compelling enterprises to undergo digital transformation to stay competitive. The global environment, marked by ever-increasing connectivity and digitalisation, has created a shift towards digital adoption. Enterprises worldwide are realising that robust digital infrastructures are essential, not just for survival but for thriving in today's fast-paced, interconnected marketplace.

This realisation has driven enterprises to embrace emerging technologies like artificial intelligence (AI), machine learning (ML), the internet of things (IOT) and blockchain to innovate and create new revenue streams. Technology innovation is crucial for streamlining operations, enhancing productivity and delivering superior customer experiences. 

It enables businesses to adapt to changing market dynamics, ensuring business agility and empowers enterprises to thrive in the digital age. This has also pushed enterprises to leverage AI for rapid innovation, enabling businesses to develop agile solutions that address complex challenges quickly and efficiently.

Steven Sutherland, Divisional Executive of Adapt IT Telecoms.
Steven Sutherland, Divisional Executive of Adapt IT Telecoms.

The value of these new and innovative technologies is clear, but even so, many businesses are facing roadblocks and challenges in purchasing and implementing them, especially in relation to showcasing ROI. We examine these in more detail below.

ROI roadblocks: Technology challenges impacting business

It is clear that implementing innovative technologies today plays an important role in enhancing the competitiveness and success of businesses. Even so, many businesses face challenges related to implementing innovative technology solutions. These challenges include the following:

Budget constraints

While recognising the need to embrace technological advancements, businesses often find themselves constrained by budget limitations. Even when a technology perfectly aligns with the business objectives and promises significant benefits, its implementation depends on cost considerations. These budget constraints hinder the ability of businesses to fully leverage innovative technologies, which limits their potential to generate returns and achieve long-term success. Decision-makers, therefore, need to navigate the delicate balance between adopting innovative solutions and adhering to financial constraints.

Stakeholder retention

While adopting technology offers potential benefits, such as improved communication, personalised experiences and streamlined processes, implementing the solution often requires significant upfront investments in infrastructure, software and training. Over and above this, the integration of new technology into legacy or existing systems can be complex and disruptive, which could lead to decreases in productivity and efficiency. Balancing these expenses against the potential long-term benefits can pose challenges in accurately assessing the ROI of technology initiatives and their impact on stakeholder retention. A decrease in ROI or revenue could signify trouble to stakeholders and cause them to take action by pulling their shares.

Impact of cloud technology on operating expenses

The main challenge with cloud technology is the transition from upfront capital investments to ongoing operational costs. While cloud services offer flexibility and scalability, businesses must manage operating expenses carefully, as increased operational expenditure can impact ROI. Traditionally, ROI calculations consider higher capital expenditure and lower operational expenditure. However, with cloud services, the cost structure shifts towards increased operational expenses, potentially altering traditional ROI calculations.

People behind the technology

There is a vital need for skilled human resources who are trained to utilise the technology being implemented by the business. Skilled personnel are essential for maximising the value of the technology investments. Without them, businesses may struggle to implement and optimise technological solutions, leading to decreased efficiency and missed revenue opportunities. Continuous training is also needed to keep up with technological advancements, which is an additional cost that potentially impacts ROI. Another common issue arises when businesses adopt a new technology solution but fail to fully leverage its capabilities. This often occurs because they lack the necessary skills or understanding to maximise the potential of the technology they already have in place. As a result, they prematurely seek out new technologies without fully exploiting the benefits of their current investments.

From the above, it is clear that many businesses face several challenges, especially in relation to showcasing ROI for these technologies. Due to this, businesses may hesitate to invest in the technology they need, fearing the potential financial risks and uncertainties associated with implementation. Overcoming these challenges is essential for businesses to fully realise the transformative potential of innovative technologies and drive sustainable growth. The question that needs to be asked now is: “How can this be done?”

Unlocking ROI: Collaborative strategies for the digital age

The challenges mentioned above are a problem for businesses and software service providers. From a business perspective, as a leading software service provider, Adapt IT understands the challenges enterprise customers have to navigate regarding technology integration and the need to showcase ROI. We can offer a few different approaches to navigating these challenges in today's digital world.

In various industries, there's a common misconception that businesses prioritise technology decisions solely based on identifying the optimal solutions. However, the reality is quite different. Businesses primarily make these decisions based on budgetary constraints and the imperative to demonstrate tangible ROI. In simpler terms, it's not always about what's best, but rather what's feasible within financial limitations and can deliver measurable benefits to the company's bottom line. One of the primary challenges associated with this issue is the conventional calculation of ROI, where capital expenditure (capex) is typically expected to exceed operating expenditure (opex). 

This traditional approach poses difficulties, particularly in light of the adoption of cloud technology. As businesses now increasingly leverage cloud solutions, it becomes clear that the established ROI framework may no longer adequately capture the full spectrum of costs and benefits. For example, our innovative Advanced Analytics solution allows a business to identify revenue leakage and has fraud detection capabilities. The results of this technology can, therefore, directly increase profitability, but this will not necessarily be reflected in the traditional ROI measurement model. This highlights the need for a new approach to measuring ROI that truly reflects the value technology brings to businesses.

Another possible solution would be to introduce a revenue-sharing (rev-share) model. By aligning the interests of businesses and software service providers, a rev-share model incentivises both parties to focus on maximising the value derived from the technology investment. Under this arrangement, businesses would pay for software services based on the actual value generated or revenue realised from the use of the technology. This shifts the focus from upfront costs to outcomes, allowing businesses to justify their technology investments better and ensure software service providers are motivated to deliver tangible results. A rev-share model also fosters collaboration and partnership between businesses and software service providers, encouraging ongoing innovation and optimisation to drive continuous value creation. Overall, embracing a rev-share model offers a promising avenue for navigating technology integration challenges and showcasing ROI in today's digital world.

These collaborative strategies not only address the challenges of ROI measurement and technology integration but also offer exciting opportunities to truly uncover and showcase the value of the innovative technology solutions available to enterprise businesses today. These initial concepts serve as thought starters, but what's truly essential is fostering collaboration between businesses and software service providers. By coming together and initiating conversations around these strategies, both parties can address the myriad challenges they face. It's about creating a forum where ideas can be shared, and solutions can be developed collectively to benefit everyone involved.

Conclusion

As technology rapidly evolves, the future of business success hinges on collaborative approaches to harness the full potential of innovative technologies. Embracing partnerships and forward-thinking strategies will be essential for navigating digital transformation challenges and driving sustainable business growth. This dynamic landscape offers immense potential for evolution and success, making it an exciting space to watch.