SMEs warned of hidden ‘productivity tax’ from IT sprawl

Techinnovate has argued that Australian small and medium-sized enterprises face a growing productivity drain from fragmented IT oversight, as businesses add new tools and processes ahead of 2026.

In commentary circulated by the Melbourne-based IT services firm, Digital Innovation Specialist David Kil said many SMEs still frame IT problems around major disruptions such as outages and cyber incidents. He said a different cost often sits in the background and builds over time, through small delays and recurring friction across day-to-day work.

Kil said the effects rarely appear as a single expense. He described them as lost time, repeated workarounds and gradual slowdowns spread across teams.

"Australian SMEs often think about IT problems in terms of outages, cyber incidents or major system failures. But heading into 2026, the bigger cost for many businesses is far quieter and far more persistent. It is the steady productivity tax created by poor IT oversight," said Kil.

Tool sprawl

Kil linked the issue to growth phases, not downturns. He said growing businesses add tools quickly across functions such as sales, operations, finance and collaboration. He said cloud services make it easy to deploy systems. He said they make it harder to keep a clear view of how systems connect and who manages them.

He described a pattern where oversight becomes fragmented and decisions occur reactively. He said individuals approve or procure software in response to immediate needs, but no one owns the combined environment. He said each local decision may appear sensible on its own, yet collectively increases complexity.

"In practice, IT oversight becomes fragmented. Decisions are made reactively by whoever feels the pain first. A founder approves a tool to unblock sales. An operations manager solves a workflow issue. A finance team adds software to speed up reporting. Each decision makes sense in isolation, but collectively they create complexity that no one fully owns," said Kil.

Everyday friction

Kil said the outcome tends not to be a high-profile failure. He said it shows up as constant friction. He cited time spent logging into multiple systems, delays from access approvals, and staff working around slow or unreliable tools. He also pointed to recurring issues that persist because teams do not address root causes.

He said onboarding suffers when businesses lack documentation and consistency across systems and processes. He said inefficiencies often seem minor in isolation and remain easy to dismiss.

"The result is not a dramatic failure, but constant friction. Staff spend extra time logging into multiple systems, chasing access approvals or working around slow or unreliable tools. Issues recur because root causes are never addressed. New employees take longer to onboard because processes and systems are undocumented or inconsistent," said Kil.

He said leadership can misread the problem because time losses spread across many employees and days. He said it can take time before senior management sees a pattern. He said the symptoms can look like cultural or performance issues rather than technical ones.

"These costs are easy to underestimate because they are spread thinly across the organisation. Ten minutes lost here and half an hour there multiply across dozens of staff and hundreds of working days. By the time leadership notices a productivity issue, it often feels cultural or performance-related rather than technical," said Kil.

Rising expectations

David said the pressures around speed and integration are increasing as businesses approach 2026. He said customer expectations have shifted toward faster responses. He said employees expect smoother digital experiences at work. He said partners and suppliers assume systems integrate well.

"What makes this more challenging in 2026 is that expectations have changed. Customers expect faster responses. Staff expect seamless digital tools. Partners and suppliers assume systems will integrate cleanly. When IT environments lag behind these expectations, businesses feel slower than their competitors even when demand is strong," said Kil.

Accountability gaps

Kil said unclear ownership of IT environments compounds the issue in many SMEs. He said responsibility often spreads across leadership, finance and operations, with external providers handling parts of the stack. He said problems that do not trigger a crisis can sit unresolved for long periods.

"Another contributor to the productivity tax is unclear accountability. In many SMEs, IT is nobody's core responsibility. It is shared between leadership, finance, operations and external providers. When something works poorly but not badly enough to break, it sits in limbo. It is acknowledged, but never prioritised," he said.

Kil said that lack of oversight can also shape spending decisions. He said some businesses treat IT investment as discretionary rather than strategic. He said short-term savings can take priority even when efficiency losses cost more over time.

"This lack of ownership also affects decision-making. Without clear oversight, businesses often treat IT spend as discretionary rather than strategic. Short-term cost savings are prioritised over long-term efficiency, even when the hidden cost of inefficiency is far higher than the visible cost of support." 

Turnover risks

Kil said employee turnover increases operational drag when systems rely on informal knowledge and undocumented workarounds. He said when staff leave, the organisation can lose the context for how processes function. He said bottlenecks can then become persistent.

"Staff turnover compounds the issue. As people leave and new team members arrive, undocumented systems and informal workarounds disappear with them. What once worked because someone knew how to fix it becomes a recurring bottleneck once that person is gone. Each departure increases friction unless systems and ownership are formalised."

Practical steps

Kil said SMEs do not need complex processes or heavy infrastructure to reduce the productivity drain. He said businesses should focus on clarity around which systems matter most and who owns them. He said regular reviews, documented ownership and proactive maintenance can reduce friction.

He also said performance improvements may come from reducing drag in existing tools rather than adding more technology. "As Australian SMEs look toward 2026, the businesses that perform best will not necessarily be those adopting the most new technology. They will be the ones that reduce drag in what they already use. Eliminating the hidden productivity tax is less visible than launching new initiatives, but its impact is often far greater."

"Poor IT oversight rarely causes sudden failure. Instead, it slowly taxes momentum. Recognising and addressing that cost is becoming one of the most practical competitive advantages available to growing SMEs," said Kil.