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When CDW opened its doors 20 years ago, most companies viewed IT as a cost center best policed by the head of finance. These days, the trend is for IT to report to the CEO, which makes sense if you look at technology as a driver of the business and core to business processes. Yet in many small businesses, IT answers to the finance department almost by default—simply because there's no CIO and fewer functional divisions.
CDW Corp. takes a third path. From the beginning, we felt strongly that technology was more than a support function. So IT reported directly to the CEO—and that's where it remains today. (CDW didn't even have a CIO until it had reached well over 500 employees and $500 million in annual revenue.)
In any case, there's something more important than where IT fits into the organization chart. That's whether your tech shop is providing insights—not just information—that will help management focus on where the company is making money, how the dollars are being spent, where to invest capital for growth and in which areas you're just spinning your wheels.
Here are some guidelines, based on CDW's experiences, to help small businesses develop the information they need—and use it to grow their companies.
Find out what's profitable. We looked at our data on a daily basis when CDW was small, and that's one reason we grew to our current level of success. From the CEO down, we made sure that our systems would generate meaningful information from a financial, managerial and operational perspective.
There are many package systems out there that a small business can build internal processes around. But that may not be enough. You need systems that can provide "aha" insights into your sales and, more importantly, insights into your margins on a daily, weekly and seasonal basis.
Do the math (often). Knowing key financial metrics every day is just plain huge for the business owner or CEO. In finance, for example, we would review sales, margins, cash, inventory and receivables on a daily basis. What that did was eliminate bottlenecks in decision-making, empowering the management team to act quickly on opportunities because they had the right information.
Invest for growth. Once a company has figured out what business lines generate profits, it can invest in improving the productivity of those areas. At the $500 million mark, we had the goal of getting to a billion dollars. So we asked ourselves: If we were at a billion dollars, what would we need from a systems perspective? How many invoices would we need to generate? Do we have the capacity to support that growth?
From then on, we started thinking of our budget in terms of the maintenance budget and the development budget that would get us to the capacity we needed for growth. Technology is a good place to start, but planning for growth also means putting your money into training, streamlining processes and improving operations to support profitable lines of business.
Cut your losses. What's great about knowing what's working is that you'll also discover what's not. Use the data to deduce what's not making money and whether continuing in that area is a waste of resources.
At the end of the day, it doesn't really matter whom IT reports to as long as it is a business partner that reports relevant news—and as long as whoever "owns" the IT function understands that the key to growth is to put systems in place that provide reliable, accurate and timely information to manage the business.
Got a question? Send it to howITworks@cdw.com.