Investing in IT: information technology is key to Mexican productivity.

It's almost axiomatic--information technology (IT) equals higher productivity.

And it's true, if the proper qualifiers are added. You can't become more productive just by throwing more money into your IT budget, but the returns can be truly spectacular if you do your homework and apply it judiciously to your business.

Until recently, there's been a serious lag in both the development and application of IT in Mexico. Much of the blame can be placed on the severity of the 1994-95 financial crisis, when credit for just about any reason, let alone high-risk software development, virtually dried up. Many businesses are only now starting to recover from that shock.

Now, lots of businesses are entering the Computer Age. The Secretariat of the Economy reports that of the US$5.8 billion that companies invested in IT last year (about 1 percent of GDP), more than one-fifth--US$1.2 billion--came from small businesses.

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For these newcomers, operating on a catch-up basis, the potential return on investment (ROI) from investing in the basics--computer hardware and software, and network services--is astronomical.

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Supporting the notion of a high correlation between IT investment and growth is a study commissioned by the Secretariat of the Economy. Prepared in late 2003 by two consultants, Laura Sall-strom and Robert Damuth, it says that every additional 10 percent invested in IT in Mexico results in almost 1 percent of additional growth in Gross National Product (GNP).

Carl Rianhard, president of Open Tec--a Mexican multi-service IT company that rents computer systems, provides IT consulting services, and offers e-learning--sees the potential returns for entry-level investments as almost beyond calculating.

"A lot of companies don't have a website," he said. "That's just counter-intuitive, because the ROI is very, very high. A website costs hardly anything to do, costs hardly anything to host, and you can do a self-made website in a couple of days. All that stuff is very, very cheap."

A self-made website may not have the impact of one designed professionally, but it ensures that anyone who gets your business card has instant computer access to a basic presentation of your products and services and an easy way to get in touch with you.

Get Close To Customers

Another low-cost, high-return investment is customer relationship management (CRM) software. This tool allows a firm to track and analyze customer purchases and identify new marketing possibilities. The user can create made-to-measure special offers to customers based on their purchasing history.

Put another way, CRM enables you to get closer to your customers, improve service, and build loyalty.

Not long ago only large companies could afford a CRM program, but today they are available off the shelf for about US$1,000.

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"It's almost like building a website--you can do it on your own," said Rianhard.

"The one we offer is called GoldMine and the name says it all. The reason it's called GoldMine is that you mine your contacts ... Can you imagine having a business where you don't remember when you are supposed to call somebody back? The return on investment on that is also very high."

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There can be little doubt that computerizing sales and administration improves accuracy and contributes to transparency--as a barrier to pilfering and human error. But not everything needs to be done at once.

"At the other end of the spectrum is investing in a whole administrative system, accounting system, maybe that's not such a fast return on investment," Rianhard said. "Maybe that goes out two, three, four years ... For some companies a two, three, four-year payback isn't good enough ... So you put that on the back burner."

Software Development

Things don't look so good on the software development side. The Mexican government realizes that the industry here lags far behind developed nations and, what's more worrisome, behind Asian economies like India and Singapore. To address this, in 2003 it announced a 10-year incentive program called Prosoft.

Prosoft is a joint program with input from the private sector, universities and the government. It has set itself three goals to be achieved by 2013:

1. To be producing US$5 billion worth of Mexican software per year.

2. To quadruple IT investment to 4.3 percent of GNP, the average for the Organization for Economic Cooperation and Development (OECD).

3. To establish Mexico as Latin America's leading software producer. (It is currently ranked third in the region, behind Chile and Brazil.)

"There are several examples of good Mexican software, but you can name them on one hand, or maybe two hands," said Rianhard, who thinks Prosoft is a step in the right direction.

But, he added, "In order to have an industry you have to have a lot more players. So, is Mexico really going to be able to develop software? That is going to have to be seen in the next two or three years."

A discovery parallel to IT investment that's gradually being made in Mexico is that human resources--the people who make your business hum--are much more than red ink on the ledger, and just could be a firm's most valuable asset.

Once a company accepts the notion that its employees are assets, it is but a short step to realizing that these intelligent resources can become even more valuable through training.

Traditionally, training has taken the form of courses, presentations, seminars, and related activities. Some companies have embraced it so enthusiastically that the investment has spun out of control.

"Sometimes companies do not realize how much they spend on training," said Rianhard. "It can become a black hole because most of the time, people don't measure their return on investment in training. It's not something that's given much follow-up."

Just In Time

That brings us to another marvel of the Information Age--the concept of just-in-time production (JIT). This practice began back in the 1970s. It enables a manufacturer to eliminate inventories, because what is needed for today's production arrives today on a just-in-time basis. Just-in-time material flows have matured to the point where firms must adopt it just to keep up with the competition.

In recent years, JIT has evolved in a new direction. Its new incarnation is called just-in-time learning, and it can be applied to any kind of business. Better still, it comes with something new for in-house training--measurable results.

Gartner, a leading provider of research and analysis on the IT industry, based in Stamford, Connecticut, defines JIT e-learning as taking place "when a person sees that he or she needs more information to finish a particular task. The person accesses the information, or mini-course, runs it and then proceeds with the task at hand."

These courses, Gartner says, must be short but highly instructional.

The e-learning system includes a database and an on-line portal that allow the user to measure results and control all the learning that's taking place in the company.

"So now I can say, I am spending a million dollars, the same amount I spent last year, but at least I know where it's going, to whom it's going," says Rianhard. "It used to be with classroom training, all you really measured was attendance. Can you imagine that?"

This ability to predict and measure results--to quantify educational value--is opening the door to a vast new market. Companies can now promise--and deliver--concrete results.

Education, Education, Education

And learning need not be confined to company affairs. In a nation like Mexico--which scores low by world education standards--a company can use e-learning to help its employees make up for the shortcomings of the public education system.

"One of the very interesting things is ... companies complaining about the education system," says Rianhard. "A lot of them are taking matters into their own hands, where instead of complaining ... they just start doing a lot of the educating themselves."

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Even with a relatively high cost per student, e-learning can provide a respectable ROI, but so far the biggest companies still reap the biggest returns. That's because it costs almost as much to design a course for 10 people as it does for 1,000.

With a sales force of 1,000, the unit cost of a US$10,000 course would be US$10 per salesman, but for a sales force of 20 ... well, you see the difference. However, even an investment of US$500 per salesman for the right course could still yield an attractive ROI.

At this point, most e-learning courses are still provided on a customized basis for corporate clients, but Rianhard thinks this will change over the next two or three years.

It gets better. Not only does a learning management system (LMS) make it possible to streamline and measure the way employees learn, installing the system transforms the entire exercise from an expense into a company asset.

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Portal To The World

To get on board, a company must invest in a learning portal--a learning environment created to guide learners through their course work, test them, and evaluate them. At OpenTec, this basic start-up package could run to US$20,000, depending on the cost of integrating the portal software with the in-house system.