Concerns about the costs of modernizing an information system are a common refrain at the start of nearly every discussion with manufacturing companies, says Ivo Procházka, our Senior Local Sales Representative at Ness Digital Engineering and an expert in the digital transformation of small and medium enterprises.
Below, read Ivo’s reflection on this topic for oRobotice.cz magazine.
Fear of Costs: A Constant Companion
Even before companies share their current challenges—or before we explain how our solutions could address those issues—an overwhelming fear of final costs looms over the discussion like a shadow.
When a manufacturing company invests in a new production hall, a state-of-the-art machine, or a delivery truck, the associated costs of these tangible assets are well understood. Yet, when it comes to enterprise information systems (intangible assets), the bar for investment is inexplicably set far higher. Statements like, “Our IT team will just program it as they’ve done before” or “We can manage with Excel; there’s no need for a new system” are all too common.
Why Are Czech Companies Reluctant to Invest in Digitalization?
Once the conversation begins to move forward, you often discover that the company has outgrown the information system they’ve been using since the 1990s. Signs of strain are everywhere:
- Manual data entry
- Overreliance on Excel spreadsheets
- Lack of integration across systems
- Inconsistent or duplicate data
- Excessive reliance on custom development
What’s behind this hesitation to invest in IT?
- Tight margins that restrict investment budgets?
- Low ambition to grow or expand internationally?
- Limited awareness of how critical IT is for staying competitive?
- Or is it the result of being stuck at lower tiers in the supply chain, perpetuating all of the above?
I often wish the conversation would start differently. Imagine hearing:
- “We want to double our turnover.”
- “We aim to expand abroad.”
- “We need real-time monitoring of key performance indicators (KPIs) across all plants.”
- “Our current system is holding us back, and we’re ready to change that.”
IT Investment: Where Czech Companies Lag Behind
Over the past decade, IT technologies supporting complex manufacturing processes have advanced significantly. The best companies understand that staying competitive requires more than the outdated standard of allocating 2% of turnover to IT. Top manufacturers in Western Europe now invest up to 7%—a level previously seen only in financial services.
For perspective, a Czech manufacturing company with annual turnover of CZK 1 billion would need to invest:
- CZK 20 million (2%) just to meet the outdated standard.
- CZK 70 million (7%) to match the leading manufacturers in Europe.
Unfortunately, most Czech companies fall short of even the 2% threshold.
The Risk of Falling Behind
Czech manufacturers face a significant risk: without embracing the trends of digitalization, automation, and robotization, they may struggle to keep pace with global leaders. Digitalization goes far beyond implementing isolated robotic systems or using Excel for production planning.
True digitalization means taking a holistic approach to company operations, where:
- Every activity is digitally managed.
- Data flows seamlessly between departments and processes.
- Order statuses are available in real time.
- The focus is on value-added tasks, not correcting, rechecking, or manually entering data.
IT as a Strategic Investment
Manufacturing companies must move beyond short-term budget constraints. Instead:
- Define ambitious business goals, such as doubling revenue.
- Shift IT from a cost center to a strategic enabler for future growth.
- Align IT investments with your economic objectives.
Final Thoughts
The best companies understand that IT investment is no longer optional. It’s a necessity for those looking to remain competitive in an increasingly digital world.
Ivo Procházka
Senior Local Sales Representative
Ness Digital Engineering