Small and medium sized business owners and managers up and down the country have been given the credit and responsibility for returning the UK to sustained economic growth. The Government has made a great deal of its efforts to cut red tape to support small and medium enterprise (SME) business expansion, and there seem to be hints of economic recovery emerging as we come into 2014. In this context, then, are the worries of business leaders a thing of the past?
Of course not. As both the Prime Minister and the Chairman of the Bank of England have commented, recovery “takes time.” We’re in the middle of a process and this context sets the parameters for concern for all business leaders: ones of managing growth, risk, competitiveness, agility, resilience and profitability in an increasingly aggressive global marketplace.
The role of IT for recovery and growth
What space, then, does Information Technology occupy in this context? I would argue it fulfils three key roles:
First, IT is an enabler of modern business practice. Whether this is in delivering e-commerce or in streamlining financial reporting, modern IT is vital in ensuring productivity and competitiveness.
Second, IT increasingly is the product of a modern business. Amazon and Tesco both built website infrastructure to support their direct sales e-commerce models. Today, both businesses sell their technology platform and brand to other businesses.
Third, IT enables new business models. Businesses may find that the information they obtain as part of one business process is valuable to another – whether this is automotive telemetry data that can be sold to insurers, anonymized patient data that can be sold to actuarial or pharmaceutical companies, or customer insight data that informs new marketing and sales practices.
Buying in IT in this context then, becomes more challenging than ever before. There’s endless choice and business leaders – who may have limited interest in or knowledge of IT – have to face decisions on the level of control they want over their infrastructure, the degree to which it is secured, the skills they need to maintain it and innovate from it.
Not investing in IT? Not an option. As private equity investor Luke Johnson commented in the FT recently – the spectre of flawed IT ought to scare us all. Indeed, Mr. Johnson credits underinvestment at the heart of the issues following his backing of a traditional retail business. Mr. Johnson wrote: “…its technology strategy was deeply flawed and it suffered from a huge under-investment in systems. It had not built its own ecommerce platform. It totally lacked any form of digital marketing presence. Its electronic point of sale systems were useless; its stock-keeping and logistics software and hardware were redundant; its management accounting was in disarray.”
The principles of IT investment
What, then, are the practical principles of IT investment that SME business leaders need to be aware of?
- Manage your risk
- The more central IT becomes to your business, the more dramatic the consequences of a technology failure. A retailer who loses e-commerce capabilities during a flash-sale, promotion (a Groupon deal, for instance) could lose out on substantial revenues. The more regulated your industry, the more control you’re likely to need over your IT. Data protection requirements, for example, can be extremely stringent about customer data in different contexts. And indeed, the more sensitive your industry or your supply chain, the bigger target you are for cyber criminals; for instance, betting firms or retailers that carry credit card information.
- This is one of the reasons that, despite the enormous hype, very few businesses’ IT processes are moving to the ‘public cloud.’ Analysts forecast only 4% of these processes will move onto these public Internet services, such as those sold by Google and Amazon. Most organisations of any scale prefer what’s called a ‘private’ or ‘hybrid’ cloud, entirely or primarily using business-owned IT that has made available, securely, over the internet. It limits their risk, gives them the ability to build in additional redundancy and resilience, and avoids complex questions around ‘data sovereignty,’ privacy laws and the like.
- Be aware of the technology context in which you’re operating
- Today’s society is increasingly characterised by the collision of four major technologies: internet based services or the ‘cloud,’ mobile technology providing ubiquitous internet access, social networks facilitating new connections between consumers and businesses and the large repositories of data underpinning it all. Some have called this the ‘third platform’ of computing.
- For all businesses that are looking to grow in this context, the implications of these technologies need to be taken into account. Even a small chain of hairdressers could stand to benefit from capitalising on online appointment booking, digital and social remarketing to their customer base, using data insights to manage stock, stylists and prioritise traditional marketing. For services and manufacturing businesses, the implications may be even more profound.
- Understanding the context of this third platform on some level opens you up to digital creativity that may help accelerate your business to a new level.
- Ensure that whatever your IT, you have the agility to change
- Modern IT has to flex to the requirements of modern business practice. Things simply move faster today than they did before; if you decide to bring a new product, service or promotion to market, you can’t wait for servers to be deployed, developers to become available, for code to be compiled. New, agile methods of web development, and IT that is defined by software, rather than discreet and rather more cumbersome physical hardware and software, is giving businesses of all sizes the ability to react to change far more rapidly than ever before.
- Prepare for the Internet of things
- There have been jokes about ‘internet connected fridges’ going around since 2000, but the potential for the internet of things is far greater than this. If a manufacturer of widgets collects anonymised usage data from their products, they can use real-time customer insight to design the next generation of products in precise alignment with customer needs, use sensor data to anticipate the need for repairs ahead of failure and deliver customer service a cut above the competition, or market or remarket to customers who might need a replacement widget. And the widget needn’t be significantly high tech – internet connected sensors could be embedded in your boiler; in your PC; in your toaster or PVR, and could set you apart from the competition in a world of hyper connected consumers and smartphones.
- There’s no question that the information technology shaping the context for modern business growth is complex, but it needn’t be overwhelming. Indeed, the alternative, as Mr Johnson noted, is complete failure. So the leaders of any ambitious business needs to educate themselves to the point where they can have meaningful conversations with their colleagues, suppliers and consultants and set themselves up with the capacity for growth in the digital context of the third platform of computing.
Amazon’s first cashierless store arrives in Britain in sign of global expansion
By Jeffrey Dastin
(Reuters) – Amazon.com Inc will open its first-ever physical store outside the United States on Thursday.
The world’s largest online retailer said the cashierless store, dubbed “Amazon Fresh,” is located in Britain, in the London Borough of Ealing. It will carry a private UK food brand it’s calling “by Amazon” and will let consumers skip the checkout line when they shop.
The opening is a sign of the Seattle-based company’s ambition to sell food globally and its belief that physical stores are a key way to capture consumers’ high spend on groceries, a category it has yet to dominate.
It so far has worked toward that goal in the United States by acquiring the Whole Foods Market chain in 2017 and testing shoppers’ interests with an array of other formats: about two dozen cashierless convenience stores called Amazon Go, two Seattle-area Amazon Go Grocery stores that are about four times the size, and 10 Amazon Fresh supermarkets in California and Illinois.
As in the Go stores, customers will scan a smartphone app to open the UK store’s entry gates. Ceiling cameras and shelf weight censors determine what shoppers add to their carts or put back, and their on-file credit cards are billed after they exit.
The location, much smaller than a supermarket, will sell prepared meals, some groceries, and Amazon devices, as well as offer a counter for picking up and returning online orders.
(Reporting By Jeffrey Dastin in San Francisco; editing by Richard Pullin)
Global semiconductor shortage spurs run on vintage chipmaking tools
By Stephen Nellis and Hyunjoo Jin
(Reuters) – Minnesota-based Polar Semiconductor makes chips for automakers and is booked beyond capacity. But expanding production lines to help solve a chip shortage that is shutting down car factories around the world is not feasible – in part due to the scarcity of older-style chipmaking machinery.
Chip factories like Polar use these tools to make chips on 200-millimeter silicon wafers, which were state-of-the-art two decades ago. Now, advanced chips are made using much larger wafers, but there is still a lot of demand for simpler, older chips.
The demand has been supercharged by a combination of the COVID-19-driven boom in computer gear and unexpected strength in auto sales that resulted in shortages. General Motors Co on Wednesday extended production cuts at three North American plants and added a fourth to the list of factories hit, and Fiat Chrysler owner Stellantis warned the pain could linger far into the year. Shortages forced Ford Motor Co to slash shifts for production of its F-150 pickup truck, a longtime profit driver.
Automakers use a range of chips in cars. Some, such as those in infotainment systems, are made in the same cutting-edge chip factories that make smartphone chips. But other chips in braking and engine systems are made using older, proven technologies that meet automakers’ durability and reliability requirements.
But the machines to make those older chips can take six to nine months to find, said Surya Iyer, vice president of operations and quality at Polar.
“There’s no way I can expand capacity beyond just stretching my limits,” Iyer said. “A real capacity increase would take nine to 12 months, minimum.”
Resellers of chipmaking gear saying they cannot find used equipment, leading some buyers to stalk old factories in the United States, Japan and Europe, waiting for them to close in hopes of snapping up the gear inside.
“Demand is hot for used equipment, but we don’t have enough of them to cope with demand,” said Bruce Kim, chief executive of South Korea’s SurplusGLOBAL, one of the largest dealers of used chipmaking gear.
He said used equipment prices have gone up by as much as 20% over the past six months, while the number of refurbished 200mm tools fell to 1,000, down from between 7,000 to 8,000 a decade ago.
Ohio-based Rite Track, in normal times, buys up old chipmaking equipment, upgrades it and sells it to chip factories. But Chief Executive Tim Hayden said the recent squeeze has spurred the company to spend more time sending technicians out to upgrade tools that are already installed on factory floors in order to squeeze more chips out of them.
“You just can’t go out on the open market and buy a used 200-millimeter tool – they’re just not readily available,” Hayden said. “So people are getting a little bit more creative.”
NEW OFFERS FOR OLD TOOLS
Demand for old tools is so robust that buyers are looking at every kind of factory. Spin Memory in Fremont, California, is designing a new kind of memory chip and maintains a small “pilot production line,” mostly to provide samples to potential customers, said Chief Executive Tom Sparkman. Even though Spin Memory’s tools use 20-year-old technology, Sparkman gets offers to buy them almost every day.
“We haven’t taken the plunge to get rid of it yet, but some days it’s tempting,” he said.
Toolmakers such as Applied Materials Inc and Lam Research Corp, meanwhile, are building booming businesses by refurbishing or recreating some of their greatest hits from the 1990s and earlier.
“It’s really exploding,” said Mike Rosa, head of strategic and technical marketing for a group at Applied Materials, the world’s biggest chip-equipment vendor.
David Haynes, a managing director at Lam Research, said demand for 200-millimeter tools was once mostly from China as it worked to build up its domestic chipmaking industry. Now, he said, customers from around the world are looking to buy or upgrade older tools.
Still, investment in older technology lags relative to the spending on more advanced production lines, or “nodes” as they are known in the industry.
“Most of the capital expenditure has been going into advanced nodes,” said Tyson Tuttle, chief executive of Silicon Laboratories Inc, which designs automotive chips to be made on older technology. Chipmakers “have always relied on the fact that the digital guys move out of the older nodes, and that frees up capacity for all the support chips. The problem is, the digital guys aren’t moving out as fast. The mainstream nodes are all just jammed.”
(Reporting by Stephen Nellis and Hyunjoo Jin in San Francisco; Editing by Jonathan Weber and Matthew Lewis)
Boeing looking for new $4 billion revolving credit facility – source
(Reuters) – Boeing Co has approached a group of banks for a new $4 billion revolving credit facility, according to a person familiar with the matter, as the planemaker battles a prolonged slowdown in commercial air travel due to the COVID-19 pandemic.
Investment-grade rated companies use revolving credit facilities as backstop financing, with these facilities remaining undrawn for the most part.
The U.S. jet manufacturer has the option to raise the size of the two-year credit facility to as much as $6 billion, the person said on Thursday.
A Boeing spokesman declined to comment. The development was earlier reported by Bloomberg News.
Boeing Chief Financial Officer Greg Smith had discussed raising more debt at the company’s quarterly earnings call in January.
Smith said Boeing has “sufficient liquidity” currently, but it continues to consider all options to strengthen its balance sheet.
(Reporting by Joshua Franklin in Boston, Eric M. Johnson in Seattle and Ankit Ajmera in Bengaluru; Editing by Shounak Dasgupta