What are the real costs of IT ? Or should that be value?

costs of IT

How do the real costs of IT relate to your organisation’s ability to rapidly respond to change?

Put another way, do adaptable organisations result after adopting the latest technologies?   Or are adaptable organisational cultures and capabilities a prerequisite for the successful implementation of modern digital and information technologies?

From the earliest ages, philosophers recognised that change was the norm. Question is: Who or what is the driver?

Change is the only constant” is a quote attributed to  the ancient Greek philosopher Heraclitus, as well as being cited by Plato.

However, when in comes to change in both modern society and the business world alike, the elephant in the room is the increasing rate and breadth of change induced by the adoption of modern technologies. The key is how adaptable leaders and their organisations are in the face of rapid change. This is where the real costs of IT need to be considered.

The reality is that the combined influences of the explosive uptake of innovative, readily accessible and mobile digital technologies supported by pervasive high speed global communications has turbocharged this rate of change. The bottom line is that this rate of change is rapidly shaping the landscape for business and CIOs alike, and resetting the expectations of today’s IT departments of their users.

Essentially, the structure, operation and expectations of IT departments by today’s businesses are becoming a far cry from those of 10 years ago. Question is then, how does this shift change the real costs of IT within the organisation?

The real costs of IT : Actual cost + Opportunity cost.

The challenge facing incumbent CIOs and IT departments alike in well-established organisations, is that where the IT spend cannot be correlated or associated with delivering business and organisational outcomes, the focus by executive leadership then falls on cost. Whether these IT costs are associated with maintenance, support, service delivery, on-premise, hosted, cloud, internally supported, outsourced or through managed services arrangements, the bottom line is that it still is costing the organisation real dollars – an outgoing cash-flow to be minimised.

The catch cry of many CEOs and CFOs who cannot directly associate enterprise IT with demonstrable business value is “We’re spending too much on our IT”

Where IT is under relentless scrutiny for cost, successful CIOs that have been able to steer the focus away from cost towards IT delivering value.  Easier said than done, right?

The reality is that perceived or actual value  trumps cost.

What comprises that value will, of course, depend heavily on a range of factors such as the specific type of organisation or industry, risk profile, compliance and regulatory mandates, not to mention the set of challenges facing the organisation at that point in time.

Consider the following scenarios:

  • If it can be showed that a $100,000 increase in IT cost relates to a $1 Million net benefit to the business, the decision to go ahead is a no-brainer.
  • If, however the business benefit cannot be clearly articulated, the whole discussion will revolve on cost, and that is not where CIOs and organisations want to be.

Question is, which road is your business heading down, and what can you do about it?