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Business Adviser

Creating value and driving growth through Information Technology

By Dennis Fortnum
Canadian Managing Partner, KPMG Enterprise

Technology is an important tool for private companies to achieve efficiency, increase revenue and stay one step ahead of the competition. While private company owners and entrepreneurs understand the importance information technology can play to adding value and driving growth for their business, it’s always a challenge to keep abreast of the latest developments and solutions best suited for the company and its business objectives. Therefore, it is helpful to consider a formal process that maps technology to your business initiatives, making technology an integral part of the overall business plan and an important component on longer term growth initiatives.

It’s key to recognize that technology encompasses both a cost of doing business and an opportunity to do more business, and that there needs to be a dynamic balance between efficiency and innovation. CIOs or heads of the IT department need to be strategic thinkers, able to speak the layman’s language and deliver the message that technology can create new opportunities and enhancements to the business and facilitate growth for the company.

Technology has a cost not only in dollars, but also in time and human resources, and even though some departments have become more appreciative of their IT counterparts, the entire executive team of a company needs to embrace to the importance of technology and the fact that the IT function has moved from support to main growth driver. Often, the hesitation to engage and invest in IT is usually due to either perceiving high, prohibitive costs of technology innovation or a lack of understanding from management of the untapped potential that IT presents.

However, private companies can gain a competitive edge by placing information technology at the core of their business plan in order to:

• grow revenue by developing new marketing channels and reaching more potential customers
• achieve greater efficiency in reducing costs and streamlining operations
• increase agility and keep pace with global competitors in a world where the digital marketplace is becoming the primary marketplace

What is cloud computing and is it right for you?

By Ken Cochrane
Partner, KPMG Enterprise, Ottawa

By Yvon Audette
Partner, KPMG Enterprise, Toronto

The public cloud is a range of computing services accessible on the Internet, that are hosted by providers who make these services available to many businesses and individuals on a pay-as-you-use basis. Cloud services offer the capacity for the users of the service to have access to increased computing power when their business cycles demand it without having to plan for this capacity in advance.

The cloud can offer your business real benefits including reduced capital investments in technology, a need for fewer technology staff, enhanced security and reduced potential for business interruptions.

You will hear terms such as Software as a Service (SaaS), Platform as a Service (PaaS), Infrastructure as a Service (IaaS), Private Clouds and Public Clouds. These are terms that you should be familiar with so that you are informed as you consider the potential of the Cloud for your organization.

Software as a Service, SaaS lets you to subscribe to a range of software services that are designed to support specific business processes and requirements. These include e-mail, office suites (word processing, spreadsheets) and more specialized services such as Client Relationship Management and Human Capital Management among others.

Platform as a Service, PaaS lets you leverage pre-build environments that allow you to configure existing application platforms and design custom applications for these platforms.

Infrastructure as a Service, IaaS lets you run your own software applications on a cloud provider’s infrastructure so that the servers and storage are managed for you and you need only maintain your own business applications.

A Public Cloud can be either SaaS, PaaS or IaaS that is available to many other clients and will generally be more cost competitive than a Private Cloud that is either Saas, PaaS or IaaS operated for only one client.

Many technology firms have provided cloud services for years. When you subscribe to e-mail through Google, Microsoft or your Telecom provider you are using e-mail (Software as a Service) on a Public Cloud.

KPMG has recently conducted global studies that show companies and governments around the world are beginning to adopt Cloud as a means of managing costs and improving performance of their systems. The cloud service seeing the highest adoption at this stage is Software as a Service, but Infrastructure as a Service, which requires more planning to adopt, is also gaining acceptance.

There are issues to be considered if you plan to adopt cloud services and KPMG’s advisers are equipped and ready to assist you.

Digital Media and IT Innovations Can Net Tax Savings

By Ed Bartucci
Partner, KPMG Enterprise, Toronto

Innovation is critical for the success of your information technology or your digital media company. Not only can investing and developing in technology and new products or processes help your business thrive in a competitive field, but they can also help you tap into tax savings.

The government’s Scientific Research and Experimental Development (SR&ED) program offers many different tax incentives that can help offset some of the cost of innovation. Getting familiar with these incentives can help your company take full advantage of the tax benefits of carrying out innovative activities.

Types of activities that generate tax savings

A substantial number of activities your company may have already undertaken could be eligible for tax incentives. Our work for information technology and digital media companies has found eligible tax incentives in:

• Software programming relating to processing speed, performance or connectivity
• Wireless and telecom applications
• Communication protocols
• Internet security and content delivery
• Advanced mathematical modeling
• Artificial intelligence
• Stand-alone and online digital media applications and games involving e-learning
• Device form factor improvements.

Investigate provincial incentive programs

Some provinces also offer additional incentives. For example, BC Interactive Digital Media Tax Credit is a refundable tax credit equaling 17.5 percent of qualifying BC labour costs for interactive digital media products produced in British Columbia.

Likewise, the Ontario Interactive Digital Media Tax Credit is a refundable credit of up to 40 percent that applies to digital media products designed to educate, inform or entertain individuals. The credit applies on salaries that are not included in a SR&ED claim, plus certain marketing expenses. Other incentives available in Ontario include the Ontario Sound Recording Computer Animation and Special Effects Tax Credit, Apprenticeship Training, and Co-op Education Tax Credits that often are available for digital media companies.

Further benefits for SR&ED activity are also available to qualifying companies in Quebec, Alberta, New Brunswick, Nova Scotia, Newfoundland, Saskatchewan and Manitoba.

What qualifies?

In general, under the SR&ED tax incentive rules, the following costs are potentially eligible for benefits:

• Salaries
• Contractor payments
• Materials
• Payments to universities and research organizations
• Capital assets purchased or leased
• Certain overheads.

For example, in Ontario, for every $100 of salary related to eligible activities, your Ontario-based company could be entitled to up to $39 in tax credits or refunds. Small- and medium-sized Canadian controlled private companies could be entitled to up to $73 in tax credits or refunds.

You can use the tax savings available from these innovation incentives to help increase your bottom line and working capital so your information technology or digital media business can continue to grow. We can help you identify areas for potential savings and help you meet the various requirements and deadlines of these incentives.

No budget for social media? Empower your staff, and compete with the big players! By Saurabh Mukhi Manager, KPMG Enterprise, Toronto

A large population of the world is on Facebook. There are few companies who recognize the power of engaging their audience through social media. However, for smaller, private organizations, the costs and risks associated with it may be too much to absorb. Fortunately, there exists an untapped resource within your organization, and with the right rules of engagement, you can empower employees and compete with the even biggest budgets.

Social media is the buzz word across all industries right now. The question is not whether your organization needs it – yes it does – but who should manage it and how? Many organizations are outsourcing their social media management activities to so-called social media “experts” or enthusiasts. In April of 2009, a major company issued a press release seeking a summer Twitter intern (aka “Twintern”) to manage its Twitter presence. The story made headlines and questioned the seriousness of how an international brand wanted to manage their social media presence with an intern. The company failed to recognize the seriousness of the channel or how it can be integrated into their overall communication strategy.

Why outsource your social media management to someone who is not aware of your brand value or your culture? Your organization already has the right people and the skills to manage your online presence and compete with the biggest players out there. A key part of your social media management approach lies within your organization and its employees. An employee can be the steward for your organization and communicate the passion and culture that represents your brand better than most external parties, so long as you understand their needs and give them direction. Each level within your organization has unique personal and professional needs:

These individuals can be your secret weapon in communicating with your audience, but only if they are provided with the right guidance and outlet

An international non-profit organization developed a set of personal communication guidelines to guide staff and volunteers while sharing their experiences through various blogs, social networking sites, wikis, forums and photo and video sharing sites. By opening up the social media channels, providing their staff with the right guidelines and encouraging open, honest communication, the organization embarked on a social media journey that would change its entire operation and enhance the publics’ awareness and opinion of their volunteer efforts.

How to begin your own social media journey?

The reality is that every organization has different social media needs. Small, private organizations should not however forego the opportunity to connect with their audience because of cost or risk. By leveraging its existing employees and empowering them to share their passion while managing the organization’s reputation, any organization can compete on a level playing field.

Business Adviser is published by KPMG Enterprise™ specifically for owners and executives of private companies. KPMG Enterprise is a network of professionals devoted exclusively to helping business owners and entrepreneurs build value and grow thriving enterprises. kpmg.ca/enterprise.