The recent report by the Central Bank into bank lending to smaller firms has unequivocally shown that our banks are just as short sighted today as they were at the height of the madness that saw billions being blown on property loans.
Dan O’Brien, economics editor with the Irish Times, in a blog today, goes into some detail about just how skewed lending was back in the heady days of the property boom.
O’Brien shows that the tech sector, IT in particular, was always a poor show in the loan department as it could not, apparently, turn muck into gold in the way that property appeared to be able to do.
"That individual property developers were routinely doing deals involving loans that exceeded the total borrowing of the IT sector gives a good indication of just how insanely skewed lending priorities were," writes O’Brien.
Just let that statement settle for a moment as you recall the wild days before the crash and the current unpleasantness. Even when money was being flung in all directions, banks were unable to see the growth potential and potential return from IT.
Alas, O’Brien holds no great hope for current practises either.
"If there is expertise in the banks on the IT sector, it has not translated into capital allocation prioritisation," he writes of the current banking practice.
As if further illustration were necessary, RTE News, in its coverage, spoke to a small business set up by a person of long experience. A taxi man turned business owner founded Xpert Digi Taxis to be a more technologically advanced version of a normal taxi company. Vinny Kearns used his years in the business to identify where technology could improve the business. Despite the current climate, the business is thriving, but Kearns recounted an experience whereby a loan request to a bank for an advanced phone system that would further increase capabilities was turned down.
Now this was just one example, but it seems to characterise the situation that is so expertly illustrated by O’Brien-there is no understanding in the banks of how businesses can leverage technology to grow and develop. This situation means that businesses are not getting the finance they need to invest in technology and thus create efficiencies and develop capabilities.
IT departments in this country used to be thought of a profligate for investing in technology for technology’s sake. This was followed by a contraction whereby an investment had to be justified, to have a business case, a return on investment. Now, the situation has gone full circle to the point where there is no case, there is simply a lack of understanding by the banks of what technology can do for a business and so, through ignorance, the answer is no.
Unfortunately the wider examples in the industry are not helping. Apple continues to delight and baffle in equal measure as it hovers around being one of the most valuable companies that has ever existed. Then there is Facebook, one of the biggest online phenomenon there has ever been and yet its shares continue to slide as its less than certain business model continues to disappoint. Market observers look at these, as even stalwarts such as Microsoft struggle in certain areas, and they think that all IT must be like that. Whereas in actual fact, the real business of IT, the kind that happens every day with companies that were founded down the road, continue to grow in tough times. One need only look in the pages of ComputerScope and Irish Computer every month to see companies that are expanding and developing, often at modest pace, but there nonetheless.
The service delivery model, for everything from email and CRM to ERP and HRM, cloud computing and bring your own technology (BYOT) all have something to offer Irish businesses, irrespective of what their core business is, but just don’t try to put it down on a loan application form for an Irish bank, because it won’t get you very far.
One may as well say that you are looking for a loan for a set of alchemist’s vessels to turn base metal into gold because a Harry Potter-esque search for the Philosopher’s Stone seems to be just as farfetched as getting money for technology to support your business in Ireland.
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