Firms dependent on technology will keep spending on IT
Gone are the days when, thanks to the unprecedented economic boom, companies just signed up for a new system. Today, most of the projects would need to present a strong business case for approval, says Rajeev Lalwani, who leads KPMG's IT Advisory practice in the Lower Gulf.
"Businesses are re-prioritising projects now," he said. "There have been so many projects that were hurriedly done without business cases. Those in the planning stages may be delayed. And some fancy projects could be put on halt."
He said IT spending in certain sectors such as real estate and construction would slow down while those in the government, financial services and retail firms would not.
"There are organisations that will not stop spending on infrastructure projects, such as IT and network infrastructure like laying roads or bridge infrastructure; you are not going to stop building," he said.
KPMG has been more popularly known in the area of auditing. What does the firm offer to its clients in terms of IT?
We'd like to be known as a trusted advisor. We are not a product vendor as we don't go and push products. We like to understand clients' challenges in decision making and their needs that are not being met. We start from knowing the business problem then finding out the tool – if it is internal – to solve the problem.
For instance, an investment company will certainly need to understand how its portfolio is doing and how the sector will perform. Here, most of the information will have to come from outside. Here, we can't provide the information but we can select and source the provider as we talk to vendors. We can be the link and help negotiate, we can save you money on that.
How much fee do you usually charge?
It depends on the size of the organisation and scope of the work or business challenge.
The first thing that we suggest to a company is to start a small diagnostic that probably costs about $25,000 (Dh91,825) to $50,000 or about Dh100,000 to Dh200,000. And that diagnostic will reveal what your return on investments for the tool is, where to implement it and so on.
Getting your services is not cheap. We presume your clients are mostly large corporations?
We work with retailers, financial services, governments, banks and telecommunication companies. We tend to work with large organisations, which register more than $50m or $100m in revenue, where they have data or information challenges. They have multiple products, multiple segments of customers, multiple geographies and that is where the complexity comes in. You need to have enough turnover to use these technologies otherwise you can do other things such as excel sheets. SMES need business intelligence and some form of data analysis but I wouldn't say they necessarily need us. I am sure there are SMEs, particularly the online ones, for whom data analysis is important.
Companies now – multinational giants and new entrants – are on a race to capturing a bigger slice of the rapidly-growing small and medium business market. In the UAE, there are some 200,000 SMEs making up more than 90 per cent of total business entities participating across industries but predominately in general trading. How's the demand for your services considering your services are much more suited for large companies?
In the last couple of years we have seen a lot of demand for budgeting and performance systems. Now companies want to know how their budgets are being spent. There was a strong demand until the past seven months.
What about the past few weeks as effects of credit crisis has been felt?
It is difficult to comment at this point in time because a lot of companies' business plans are being challenged. I haven't seen anyone stop a programme or a project but projects will certainly be challenged. People now want value, previously they wanted value-add.
As an independent advisor, what do think is happening in IT sector here? Is a downturn imminent?
People are going ahead with their infrastructure projects. IT and network infrastructure like laying road infrastructures will continue… you are not going to stop building a road or a bridge. Organisations will not stop spending on infrastructure projects. There could be some fancy projects that can be put on halt. There may be shifts on the timing, too. Those projects that are already ongoing will not stop, but those in the planning stage may be delayed. Businesses are re-prioritising projects now.
What 'fancy' projects may be delayed?
Any project can be a fancy project, even business intelligence can be classified as one if it cannot provide a clear business case. There are so many projects that have been hurriedly done without a business case. A business case will tell you why investing in a $1m system will benefit your business… such as an increase in productivity, efficiency, sale, etc.
With most of the projects expected to be challenged will IT spending in the region slow down?
IT in the real estate and construction sectors may take it much more harder in terms of large ERP implementation. If I am a large construction company and am happy with my system, I may delay plans for new systems. But companies that use technology to a large extent such as telecoms, banks, financial institutions, retail firms and government sectors will continue to spend.
PROFILE: Rajeev Lalwani Head, KPMG's IT Advisory practice in the Lower Gulf
Lalwani is a Chartered Accountant and a Certified Internal Systems Auditor. He is also certified in Intrusion Detection Systems such as the Real Secure 6.0 from Internet Security Systems, New York.
He has more than 14 years of experience in IT consulting and IS auditing in fields ranging from IT strategy and system selection to design, development and implementation of client server and n-tier software application systems.
Lalwani has been trained in the UK and Ireland on the KPMG IRM core methodologies and has also worked with KPMG UK on a variety of IRM assignments. He has worked in IRM assessments on several large banking clients as well as with a significant number of oil and gas clients.
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