Is Today's IT an Undervalued Asset?

mwillems asks: "I work in the technology industry, as a CTO. What I have increasingly seen in the last year, both in North America and Europe, is that IT has ceased to be a valid way to spend corporate money. IT spending used to be looked at as a way to gain competitive advantages. Since the .com bust, the arguments I hear everywhere is 'IT has now been proven to be a waste of money'. At many companies it is now easier to get a corporate account at a strip club than a new PC. Or a budget to develop a much-needed corporate app. If any spending is done it is on hardware - at least that is 'real'. Do Slashdot readers recognise that? Are there going to be many techies left ten years from now? What can we do to keep the spirit of innovation alive while this 'IT is bad' era lasts, and how can we make it end? And, how do you prove the value of IT? This is not as simple as it seems. Try it with a spreadsheet: as your typical CTO has to do so, every day." How do you feel about the cost benefits of IT? Is it worth what your company spends on it, especially if the advantages can't be reduced to a simple dollars-and-cents figure?

Comments

We'll eat your lunch.

[Anonymous Coward]

I work for a VBC that's known as one of the best managed companies in America. We love companies with the attitude you describe. We call them "also-rans". Each year our businesses are given a target cost they must remove using IT projects. Spending on the projects comes from projected savings. The business owns the budget, but has to spend it through a centralized IT group. In our business, the number was $270 M (our revenues are about $10 B). Miss the number one year and the VP's don't get bonuses; miss it twice and the VP's don't have jobs. The trick is measuring the benefits, and auditing after project implementation to make sure they aren't playing games with the numbers. Does it work? This year, we expect to save $1.6 Billion (across all business) while increasing IT spending 12%.

one bean, or two?

[mojogojo]

However, alternatively, I've been thinking upper managers aren't worth their salary and the overall burden placed on IT (i.e. regular staff meetings, and various time wasting activities that could be devoted to streamlining the business... or handling a data conversion from a merger, etc).

And besides, what is the value to assign to cost savings for automating processes so individual peons don't have to press buttons and screw up data? One bean, or two? When I convert a customer, order, and trouble ticket history database from one company to ours... and it allows a single support person to intelligently answer a new customers question quickly - is that worth one, two, or three piles of beans?

I hate justifying my existence, and generally never have to when I deliver on projects that simplify processes and do things quicker than would have to be done by hand...

I'm not sure, but I really don't think the sky is falling either...

missing the real problem

[cybex]

What I see both in the industry and from this question (and answers) is a complete lack of understanding of business theory (or practice). Not a single individual questioned how IT is valued, utilized, or perceived. No one mentioned competitive cost vs. advantage analysis or even the most mundane five force analysis focusing on IT.

No, the problem I see with proving the benefits of IT is the same problem I see in every department of every company I've ever consulted for. That is, a consistent lack of any real ability in those who hold any position of authority. Even when these directors, VP's, and presidents are given the right answers, they often fail to understand the questions.

No, the real problem with valuing IT is the mundane leadership now present in most of America's companies. And yes, I have the titles, experience and credits to my name to back this up.

Not my experience at all.

[jjohnson]

I work for a sub $100 million dollar a year manufacturer, and our IT department is just warming up.

Any IT project I or anyone else has proposed has had to have a rock solid cost analysis with it, and it's that analysis that makes or breaks the project. Good projects can always be justified on a spreadsheet.

For example, we're implementing a wireless network in Operations for use with hand held terminals, for doing location management (mainly a lot of barcode scanning). Our current system works in batch mode, with hourly downloads. The cost analysis pointed out that the labor alone from downloading was costing the company $150,000 per year that could be directly saved, and more than recovered the investment in a wireless network and new PDTs.

A new computer for someone is also easily justified. We had people running Windows 98 on Pentium 133s. Assume they waste ten minutes (in increments of 15 to 120 seconds) a day waiting unnecessarily (compared to a new computer) for files to open or close, operations to complete, and to reboot from the occasional crash. I think you'll agree that's conservative. That's 45 hours a year. A clerk costs at least $15 an hour ($12/hour + benefits), usually more. That's $675/year wasted. A new Optiplex GX50 from Dell is around $900, and has a lifespan of at least three years. The computer pays for itself within 15 months, providing a net savings of over $1,000 over the life of the computer.

The president is definitely not a gearhead. But taking the time to justify the costs has always paid off for me, and now he trusts me with more speculative projects, like an in-house TV network, and control units for injection molding machines that are just Win2000 workstations running a VB app with a touchscreen.

So, no, IT is not undervalued in companies that are generally well-run, and have a very rational approach to the profit and loss statement. I suspect that the same companies that now denigrate IT are the one's that jumped hardest on the bandwagon when it was hot.