12 February 2020
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Is the rhetorical question on many CEO’s lips, even though they are inwardly sure it is so.
IT advisory company’s such as Gartner provide guidance with industry averaged ratios on IT spending, such as IT spend as a percentage of revenue, of operating expense or even per employee. They are supplied, however, with caveats relating to the uniqueness of a specific business’s competitive landscapes, IT complexity and other factors which drive context.
Factors which drive context are all important.
The first of which is historic IT investment decisions based (hopefully) on a business case or other assurance of future value. As quoted in the classics, our lives are the sum total of all the choices we have made, so too is a business’s total cost of IT.
These implemented systems and landscapes will drive operating run costs as well as depreciation/amortisation.
While these historical landscapes should be reviewed within the broader IT strategy, our focus here is on the factors within your control which drive context. Specifically in the setting of the increasing pressure for businesses to adopt appropriate new technology solutions in order to remain relevant, effective and profitable.
Quality procurement is key as the most economical way of implementing a new system or technology is to get it right the first time. Formulate a proactive procurement strategy which addresses business requirements, financial objectives, commercial approach, governance plan and any operating model implications. Engage the market under a structured and impartial process and leverage competitive tension in order to extract fair market pricing.
Contract with care for the outcome. Software houses, infrastructure and service providers are notorious for their attempts to introduce ‘commercial guard rails’ into their contracts, which will ultimately drive additional cost into the landscape through inflexibility, complexity and revenue commitments. Businesses also need to ensure that their contracts deal with compliance requirements for existing and new regulations introduced by policy makers in their attempts to protect commercial, public and private rights and interests.
Governance, governance, governance. Value is anchored and delivered through operational governance which should be contracted for in structured processes, and managed across service, commercial and contractual requirements in order to ensure value for money is achieved.
These are the underlying factors which drive context into a business’s total cost of IT, and which require specialist and proactive focus.
"Productivity isn't everything, but in the long run it is almost everything." Paul Krugman, 1994, The Age of Diminishing Expectations.
