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Small, medium businesses take too many risks


Johannesburg, 11 Aug 2004
Read time 2min 40sec

Small and medium businesses are sometimes forced to take a short-sighted view of their future. This is the opinion of Willie van der Merwe, regional chief executive: private sector for Business Connexion`s Pretoria region, who says that small and medium businesses should look more towards the future when making business decisions.

"Over the last three to four years, businesses have been forced to sweat their assets to stay within cost limits," he comments.

"While current economic conditions almost demand that businesses do more with less, and financial pressure has forced businesses to cut costs, they should look closer at where they are cutting the costs."

Van der Merwe says businesses tend to cut costs where it would least affect their business in the short-term.

"ICT infrastructure maintenance is a prime example," Van der Merwe says. "Businesses may feel that cutting expenditure in this area could alleviate short-term financial problems but, in the long run, it is in fact doing an injustice to its stakeholders. Some businesses elect to perform maintenance on a time and material basis, knowing very well that the service provider will not be in a position to guarantee any sort of service level, other than on a best effort basis. Careful planning is required to ensure that such decisions are in support of the business strategy, which should in turn be in support of those clients it needs to serve."

Neglecting to close the loop between such decisions and the business strategy could cripple the business or cause it to cease to exist.

"Larger businesses have realised that short cuts are not the way to go and often make it a concern of corporate governance to avoid short-sightedness," Van der Merwe adds.

The solution, Van der Merwe maintains, lies with careful planning of business processes and closely aligning decisions to meet the needs of the business. "The crux is being able to avoid poor service delivery situations, while at the same time managing operational expenditure responsibly."

Van der Merwe says the overall aim is to be able to cut costs that will not necessarily affect the business in the future.

"It all boils down to the establishment of a well planned enterprise architecture, which should encompass such elements, through derived policy decisions and guidelines," he says.

"ICT infrastructure maintenance and service levels should be a primary deliverable to the support of the business and this can only be achieved through effective enterprise architecture planning.

"At the end of the day," Van der Merwe concludes, "small and medium business [and larger businesses in general] should look at cost cutting from this perspective: are the cost savings justified by the risk of potentially diminishing the value to your stakeholders?"

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