Money for Digitalization is on the Table, Now We Need to Choose the Right IT Partner

The most popular word circulating in public and business spaces over the past two years is the word  'digitalization'. It has been most frequently used in the context of the pandemic which 'stimulated', 'accelerated', 'prioritized', etc. it. Now it needs to be shifted into the context of money. In Croatia, an unprecedented pool of non-repayable grants for small and medium-sized enterprises has opened up through EU funds to make the concept of digitalization their reality. Through Nacionalni program oporavka i otpornosti there are several programs, the latest being the so-called digital vouchers that small and medium-sized companies will be able to use worth 75,000 kuna per individual project. It is difficult today to find a company (at least in the real sector) that has not digitalized some part of its process, and industries such as telecommunications, finance, and insurance have been doing this for decades. However, in the average small company digitalization is still an enigma that causes psychological, financial, and organizational pressures on owners. But now that money is on the table, there are no more excuses.

So now, with whom and how to start this digital revolution?

There are many IT companies in the market, specialized for certain industries or general system integrators, and it is very difficult to discern which and what kind of partner to choose so that the process goes as smoothly as possible and that this partner is reliable and present in the long term. Interestingly, of the 20 companies that received grants for digitalization from the Ministry of Economy’s tender, mostly smaller manufacturing companies, none were willing to share information with us about what they would use that money for and whom they chose as their partners.  However, almost all IT companies, for whom EU funds are also a good opportunity for new jobs, responded. They have opposing opinions on the level of readiness and development of digital processes in Croatian companies.

A recent survey by Best Advisory and Woom showed that 48 percent of companies are ready to start digital transformation, regardless of the source of funding.

– Other analyses only confirm that every second Croatian company does not feel ready for digital transformation. Consultant experiences show that the situation is even worse, and  companies primarily see the danger from rising raw material prices and direct their efforts towards solving those challenges. Generally speaking, every second company has implemented some form of 'working from home', but Croatian companies are not inclined towards a thorough digital transformation of business. However, this trend could change mid-year, when the current digital vouchers for strengthening companies’ digital capacities will be available – believes Vedran Antoljak, consultant and director of Best Advisory.

Digitalization is not an end in itself, thinks Jurica Mikulić, member of the management board for business development at Ingemark. – It makes sense only if it increases the efficiency of the company and ultimately reduces costs or increases revenues. In that sense, I think that financial aspects are not a problem for companies that have a vision of what they want to achieve through digitalization because they also have certain expectations of return on that investment. I think that organizational aspects are often a greater challenge, simply because many people resist change, even when it is a change for the better – says Mikulić.

Antoljak also mentioned a PWC analysis of more than 10,000 IT projects, which showed that only 2.5 percent of projects were completed completely successfully and within the original scope, on time and within budget. – Gartner’s analyses, on the other hand, indicate that only 30 percent of IT projects were successful in 2020 and that this is similar to previous years. This is an extremely important piece of data to consider before deciding to seek an IT partner – emphasizes Antoljak.

And when one is chosen, it is crucial, he adds,  to first discuss positions, expectations, and plans. Then it is imperative to define the details as precisely as possible in writing (e.g., tender documentation, agreement, MOU). – The client should first create a clear and as complete as possible functional specification that defines what the client expects from the IT company. Once that is clear, an important next step would be writing the technical documentation, and only after that does the actual implementation come into play, so it is crucial to define responsibilities, activities, and deadlines as precisely as possible in the contract or related document. In addition, it is important to maintain continuous communication as it allows for quicker resolution of implementation challenges, but also builds trust with the IT company – explains Antoljak.

Croatia also has 'produces' excellent IT experts of world caliber. They mostly work for large IT companies as specialists, or as entrepreneurs, they develop smaller IT companies. – The choice of integrator or specialized IT company will depend on what we are looking for from them. If it is about developing an application or some smaller part of software, the best choice will be to select a proven specialized IT company, while in the case of a larger scope or transformation of IT systems, it may be best to take an experienced IT integrator who has sufficient IT capacity and expertise to carry out more complex projects – adds Antoljak.

It is not uncommon to work with some IT professionals for two years on a software solution, after which you have to terminate the project because your partner misses deadlines, constantly raises prices, rarely responds to your emails, and then you are in a 'stalemate'. On the other hand, clients, or clients have their 'flies' and very often unrealistic expectations from IT companies.

What incentives are available to small and medium-sized enterprises, how to choose an IT partner for digitalization, and what have been the experiences so far in such partnerships can be read in the new printed and digital edition of Lider.