Charities often worry that if they don’t invest in new technologies they will get left behind. Don’t fall into that trap, warns John Tate.

For those of you with March year-ends, now is the last opportunity to revise your IT budgets for the coming financial year.

Here are some important things to think about if you are deep in planning mode for the year ahead.

So much new technology

Firstly, there is an awful lot of new technology coming onto the market. The ‘internet of everything’ is now officially the new hot topic, and ‘disruptive products’ are offering new ways of working in all parts of our professional and personal lives.

For example, it was only a year ago that the driverless car started to get mainstream media coverage – today there are prototypes out on the streets. Peer-to-peer lending and crowdfunding came into existence less than ten years ago and both practices are already threatening to completely change the way we lend and raise money.

Online shopping is continuing to grow, and Uber – which is offering a new form of taxi service – has gone from start-up in 2009 to a company valued at over $40bn. Add in developments with drones, robotics, online music, and social media and we can start to see how much is changing.

In parallel with these new developments, IT costs have continued to drop. Broadband and cloud-hosting prices are falling, as are the costs of components for laptops, tablets and mobile devices.

So should our IT budgets be reducing, or should they increase to embrace new technology?

In my view fear is driving many investment decisions, as people worry that if they don’t invest they will get left behind.

Moving off at a bit of a tangent, I’d like to mention a report produced last month by Credit Suisse and written by academics at the London Business School. They went back in time to 1900 when a different technology boom was about to explode – including new-fangled ideas such as electricity, the motor car and flight.

The report looked at how investors fared chasing new technologies, as opposed to sticking with established industries, and assessed which sectors had produced the best-performing shares over the last 115 years.

Have a think about who might have done best? Well, in the US it was tobacco companies and in Britain it was brewers and distillers. For me this was quite a surprise. Surely the technology stocks of the early 20th century would have been the best performers?

But thinking about this a bit more, there has been a pattern of disappointment in this area – with bubbles and busts involving new industries from canals and railways right up to the dotcom boom. For every successful new start-up there were many failures.

Twists and turns

So what, you are fully entitled to ask, has this to do with IT budgets for charities?

If history repeats itself there are going to be a lot of twists and turns in the technology industry as it matures. In the investment space over the last 115 years people were best to avoid getting sucked into the hype surrounding new industries and discoveries, while watching for damage done to old businesses by the rise of technology.

For example, over the last 35 years a policy of only buying shares in companies that had been listed for at least 20 years would have turned an initial stake of £1 into £60, whereas an investment approach that only bought new companies listed for less than three years would have only made £20.

Something similar is likely to be the case for IT investment in the next few years. There has probably never been a time when charity finance teams have had a more important role to play.

Common sense must be applied to all technology investment decisions – return on investment and risk management must be scrutinised ruthlessly on all proposed new IT projects; and both people and processes need to be carefully examined alongside the technologies themselves.

Make sure you follow these basic disciplines, and don’t just be seduced into following the latest technology fad.

John Tate is a business consultant, and a visiting lecturer at Cass Business School.