In the first place, the costs of services provided by most IT departments are usually poorly identified, which consequently creates the suspicion that IT is too expensive and frequently out of control. Such an attitude may leave managers unable to define priorities for reducing IT costs and increasing value, instead of adopting new techniques for the improvement of IT costing. This may result from the fact that the IT function is still the least understood and, unfortunately also the least valued function, one repeatedly criticised for rising costs and for being slow in response to business changes. Nevertheless, IT remains the key factor in the majority of businesses, making all the difference between the failure and success of today's organisations.
Does IT bring the value for money? Do organisations see what they get for the money invested in this area? When will IT costs stop going up?
These are perhaps the most often asked questions relating to the IT function in a company. There is no single answer, since such costs may be inordinately high for a number of reasons, e.g. inadequate IT systems and technology, poor management, inappropriate methods and organisation, inexperienced managers, poor project management, ineffective skills training, as well as business changes and the subsequent slow adaptation of systems... Since getting value from IT is a collective task, it must involve the whole staff, from top executives responsible for managing change down to the IT managers who deliver technology.
The above-mentioned negative features have their origin in a lack of focus and direction from the senior management, while most of today's IT costs have been inherited from the past decisions. Managing IT costs appears to be complicated - analyses from many renowned professional firms show that IT costs are difficult to reduce in the short term. Therefore it is surprising that such IT-essential items like hardware, software, telecommunications, information technology, premises etc., crucial for operational systems and facilities make up only around a half of the entire IT costs, while the other half goes to the costs connected with the people. However, nearly half of the people costs (IT staff activities) are devoted to operations and support for operational systems, and the other half is created by the costs relating to replacement, new development, R&D and mandatory changes.
Getting the full value from IT depends on how effectively IT is used. The competitive value of the IT function is not just about software packages and other system facilities - it lies in the fundamental role of the IT function and leadership in managing information and knowledge and educating the rest of the business in how to exploit them for the full competitive advantage.
Peter Borak is Information Risk Manager at KPMG Slovensko. His column appears monthly. Send comments or questions to email@example.com.
28. Feb 2000 at 0:00 | Peter Borak