The New Economics of Corporate IT: Bringing Back Relevance

Today we explore the history of IT departments and how we can shed light on the importance and relevance of IT for corporate and business relations.

The Evolution of IT Spending

As a leader in Information Technology, you’ve no-doubt watched the frequency of change in business IT, and how disruptive to businesses it can often be.

But have you noticed how quietly, yet equally disruptively, the practice of IT procurement has changed along with the technology?

The reason why organizations are buying IT is not what it used to be.

 

 

Pre-Millennium IT Spending: IT Leadership Is Born

In the late ‘80s and early ‘90s organizations saw value in corporate IT (in contrast to personal computing) because it outperformed notebooks, calculators, typewriters, and filing cabinets.

 

Soon after came communication and collaboration tools like email, instant messaging, document sharing, and specialized applications like CAD and graphics design software. And these added value by outperforming faxes, phones, boardroom meetings, and hand-drawn images.

 

At the same time, acceptance and usage of the internet exploded, making the value of information and resources available on the web too huge to go without.

 

Organizations that didn’t invest in these technologies couldn’t keep up with their peers, so not investing in IT was simply not an option. IT became a dance card; a necessary expense. This meant IT departments became a necessary expense, including the hardware and software they evaluated, procured, implemented, and managed.

 

 

Millennial IT Spending: Technology Leadership in the Spotlight

Through the ‘90s and into the new millennium, technology manufacturers and publishers saw how voraciously all manner of organizations consumed their wares. IT purchasers made budget and purchasing decisions based on having the latest technology–a.k.a. staying current with their peers, or getting an edge up on them, depending on their corporate culture–with little regard to cost. So bigger tech manufacturers started buying up by smaller ones who brought virtually any “cool” ideas to market. The faith organizations put in technology to solve business problems grew. And the race to buy up new tech happened so quickly that future values were inflated, resulting in the “tech bubble” early in the millennium. Hence the commoditization of IT.

 

Make any product “necessary”, and it quickly becomes commoditized. IT vendors and resellers began to respond as any distributor of commodities would: by racing toward near-zero margins. Prices on all manner of tech dropped categorically. PC’s that used cost $3k started selling for $750…or less. And the “race to zero” accelerated on any form of technology as soon as it was outperformed by a newer version. Rapid price reductions, and the perception of increased value they spawned, further fueled a veritable feeding frenzy on corporate IT. IT leaders typically enjoyed great autonomy over their significant budgets, and significant control over the user groups to whom they supplied technology.

 

 

201x+: SaaS and IaaS Take Relevance Away From IT Departments

As 2010 approached, it was the combination of two disruptive technologies, broad band internet access and virtualization, which enabled software publishers who survived the arguably-flopped Application Service Provider (ASP) initiative to begin prospering. Software as a Service (SaaS), and Infrastructure as a Service (IaaS) became the emerging trend, introducing an exponential increase in variety and availability of internet-based subscription applications and services.

 

SaaS and IaaS provide a level of autonomy to individual user groups they’ve never had before by offering applications and infrastructure in segregated virtual environments facilitated externally through the internet on a pay-per-use basis.

An accounting department can now compare accounting software programs, purchase software along with the cloud infrastructure to support it, and start using it without notifying any other part of their organization, including their IT department. They don’t need any formal training in technology.

 

Same goes for software and infrastructure relating to just about every department or functional group in any organization. Business applications and services that were formerly the exclusive domain of an IT department — email, security, telephony, printing services, and even internet access — are all outsourceable and manageable to a large extent by those with no formal technology training.

 

Business units and functional groups within organizations no longer need support from, or the blessing of, a dedicated IT group. This makes IT, as a business unit, little more than “a means to keep our corporate internet and intranet working”.

 

Which begs the question of any organization, “Do we really need an IT department?”

 

 

Making IT Expertise Relevant Again

As an IT leader in an era where parts of your organization are free to implement IT solutions autonomously, you need to know how to respond to this thought trend.

The key question you need to ask and answer is, “what can I offer my organization that no one else can?”.

 

When IT leaders have asked me this question over the last decade, here’s my advice:

 

Making yourself (and your IT department) strategically relevant should become your goal. All organizations have strategic goals. You become relevant by accelerating and improving the organization’s achievement of their goals. Organizational goals are achieved through business processes. Therefore, accelerating and improving the business process will make you strategically relevant. Here’s how:

 

 

Four Steps to Making Your IT Team Strategically Relevant

1. Learn all you can about who does what and how

Increase your business relevance to functional groups by growing your understanding of business processes.

 

Every department has objectives they need to accomplish. And they use certain processes in an effort to accomplish these quickly and accurately. You might have a hi-level grasp of what a group does, perhaps based on the applications they use.

 

But to learn more, you can have more detailed discussions about the human activities to see where the magic happens.

 

For example, you could find out:

  • Who accesses what information
  • In which documents do they store that information
  • How they manipulate it, and output to where, or to whom

 

2. Find out the KPI’s of each department

Understand the hard and soft KPI’s (Key Performance Indicators) within a department and within the organization as a whole as they pertain to that department.

 

What do we mean here?

 

For example, an accounting department is expected to process invoices within a certain amount of time. So you would want to find out how many invoices in how much time.

 

Similarly, an HR department is expected to fill a headcount in a certain time frame. Find out how many people and what that time frame is.

 

Lastly, an individual accounts receivable clerk is expected to keep AR accounts below a certain number of days for a certain number of invoices or accounts. So you would look for how many days and for how many invoices or accounts.

 

The point is: every department has goals to meet and each is measured against these goals. Knowing the goals will keep you relevant to make your case for IT.

 

 

3. Research the latest automation processes

Grow your awareness of IT systems that automate business processes.

Automating business processes is not unlike automating IT processes.

As such, the benefits of automating are:

  • Speeding up any process
  • Reducing the accumulation of paper that requires filing and tracking
  • Reducing risks of errors
  • Providing deep insight (reporting) into the factors that influence whatever KPI’s a department faces.

 

There are systems that will automate processes for a single department (i.e. CRM’s, accounting systems, ERP’s, and HR systems). There also are Enterprise Content Management (ECM) systems that will both automate processes for individual departments AND collect data from existing systems.

 

In addition, some systems require less technical expertise to modify than others, which could empower a business unit to manipulate processes as they see fit.

 

 

4. Quantify the value of automating

In other words, look for ways to monetize the outcomes of individual business processes.

 

Here are some examples. Speeding up an accounts payable process may result in reductions of late payment penalties or financial incentives for early payment. Reductions in labor requirements for individual processes will reduce payroll costs. Increases in marketing, sales, and customer service processes may lead to measurable increases in revenue.

 

Find out how much money you can touch, either by saving it or making more of it, through automating a business process and measuring improvements in KPI’s.

 

Here’s a hint: potential revenue increases are more appealing to business leaders with a growth mindset. No matter the department, ideas that increase the perception of profit contributions will always be welcome.

 

What’s revolutionary about this approach is how the value of IT shifts from being based on what it costs, to what it produces.

 

We can help you transform the internal value and profitability of your IT department.

 

Let’s schedule a FREE consultation and get started.

 

Image Attribution

Summary
Article Name
The New Economics of Corporate IT: Bringing Back Relevance
Description
Businesses today are purchasing apps and using that as their IT department. To prevent this trend from obliterating the importance of real people in IT, we have some advice on keeping IT roles relevant.
Author