Investment in IT Versus Spending on Staff: How Finance Leaders Make The Call

Investment in IT Versus Spending on Staff: How Finance Leaders Make The Call

This article was updated on Sept. 27, 2018.

The workforce landscape is shifting. According to McKinsey & Company, 49 percent of time currently spent on work activities could be automated with existing technology. What's more, Enterprise Innovation reports that International Data Corporation predicts a significant uptick in the tech market — reaching $2.7 trillion by 2020.

For finance leaders, the emerging struggle between investment in IT and spending on staff leads to a critical question. When is the right time for tech, and when do people drive the most profit?

Staff Spending

People are expensive. Beyond the budget needed to identify ideal candidates, complete the hiring process and onboard new staff members, there are other ongoing costs such as salary, benefits and eventual wage increases. Given the ubiquity and reliability of new technology, it's no surprise that many finance leaders see the value in process rather than personnel investment. But it's not quite so simple. Here are three areas where staff spending may be the better choice.

1. Innovation

Innovation demands people. It makes sense — while thinking outside the box has become critical for businesses that want to stay competitive, this isn't something you can offload to tech processes. The right people given the right resources can help businesses stand out.

2. Growth

While technology can expand your capacity to complete work, physical growth demands more staff. From setting up satellite offices to handling the influx of temporary work over holiday seasons, IT investment takes a backseat to cost-effective employees.

3. Culture

According to Forbes, the culture of your workplace is crucial for innovation and other effective change to succeed. Adopting this kind of culture demands three key elements — the right environment, the right processes and the right people. If staff have the ability to speak out and the avenues needed to implement change, it's possible to fundamentally improve corporate culture.

IT Investment

But what about investment in IT? When does it make sense to skip staff spending and instead budget for a new technology initiative? Finance leaders should consider three potential cases.

1. Automation

Are there processes currently handled by employees that would be better assigned to technology? Ideally, these are highly repetitive and data-driven tasks that require little in the way of decision-making or critical thinking. For example, data entry, payment processing or generating reports. Here, IT spending comes with a better return than staff investment since employees are able to spend their time working on line-of-business projects rather than churning out yet another data set.

2. Integration

Data drives better decision-making, but the sheer number of disparate data sources can make it impossible for human staffers to reliably integrate and interpret this data. Spending on best-of-breed IT analytics tools can help amalgamate data across disparate sources to enhance corporate intelligence.

3. Accuracy

Humans make mistakes. So do machines, but only when humans provide poor programming or instructions. When it comes to enhancing accuracy in data reporting, auditing or IT access requests, technology can win out over personnel. As a result, spending more up front on the right technology can save money down the line since you won't have to double check or repeat work performed by employees that contains accidental errors.

When it comes to IT or employees, consider what will offer a better ROI. It will likely depend on the result you need. If you want improved corporate culture or the foundation for growth and innovation, then you should consider spending on staff. On the other hand, if you're looking for enhanced automation, data amalgamation and accuracy, opt for investment in IT.