Your business biggest IT cost

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Chances are that the lion’s share of your company’s IT budget is going towards system maintenance and other initiatives that are so called “keeping the lights on” (costs). However essential, this spend brings little real value to the business.

Unsurprisingly, conscientious managers work very hard to reduce such costs. An important question then is :

What is your business’ biggest technology cost ?

The answer probably varies from business to business, but if like myself you spend most of your time, energy and your budget on exciting new initiatives to build for the future, your biggest (hidden) cost is likely to be : Under-utilization of IT systems

The multi-billion dollar Pareto curse

Corporate spend in technology is expected to reach USD 3.41 trillion in 2016 (according to Gartner, a consultancy).

The famous Pareto Law, more popularly known as the “80/20 rule” also applies to technology. It can be interpreted as: 80% of outcomes are produced by only 20% of inputs. As a consequence, 80% of your tech spending on cool new features is likely to be almost a “write off”.

Evidences are plentiful and so are the reasons for it. Let’s review a few reasons by mean of stereotyping:

The “I want it brand new” reason: it is the tale of business areas requesting new reports even though there exists one that meets 99% of the requirements already. Reuse does not exist in some people’s vocabulary.

The “I don’t trust the system” reason: the antithesis of the hyper consumerism, it’s the tale of fancy excel files embedded with infinite formulas, macros and external links being produced in spite of there being a system report that does precisely the same thing – all for the sake of accuracy (sic).

The “awareness” reason: this is the tale of that user who labors on an email or PDF communication to a supplier or customer unaware that the same data is available on online channels already.

The “requirements not met” reason: this is the tale of the business requesting “oranges” to be produced, the business analysts / product owners writing a specification for “bananas” and project team in technology delivering “mango”.

The “I’m still walking, but if I cannot fly, I’m not interested in running” reason. This is the tale of that new initiative that incrementally improves a given process but does not yet delivers on ALL requirements. Go live sign-off is then postponed.

You will feel it in the bottom line

Whatever the reason, under-utilization of systems is the equivalent of keeping cash under the mattress bearing no interest and being eroded by inflation.

Like it happens with other assets like cars, planes and boats – your software asset depreciates over time. That’s cost hitting your bottom line. Like with planes in business aviation, a company needs to move their software assets often enough so that they generate sufficient revenue/efficiency streams in order for them to pay for themselves and contribute a little extra. Measuring technology contribution has never been straightforward. That said, measuring the positive impact of an unused system, like a plane not flying, is quite simple: a fat and round zero.

Next steps – get it moving, get it used!

For the reasons described above, investment in promoting system utilization carry a high return on investment.

How do we make sure we make the most of our assets?

1) Make sure your requirements meet the business needs. Requirement analysis is the subject of countless research. No need to add.

2) Make sure to market internally what is being launched. If people are unaware, they will never use the asset. Constant advertising increases uptake.

3) Training is vital. With technology in our private life being as easy as smartphones and cloud services – people expect corporate solutions to deliver the same level ease of use. There are obvious limits however. For example, would you expect a pilot to fly a plane without training? Or a doctor to use the latest surgery equipment by pressing the “home” button? I’m sure one day we’ll get there – we are just not quite there yet.

4) Invest in post-delivery hand holding – old habits die hard and without the right support immediately after launch, people just give up on the asset.

5) Make sure to get senior management engagement. Else, it’s all for naught. Discipline cannot be enforced but by line management.

Cost control has never been so important – focusing on the biggest cost contributors is a good place to start.

The view in this article reflects the author’s opinion in his personal capacity and not that of his employer.

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Pedro Nassif

Ensuring that technology is a driver for positive change in the organization. Solid expertise in pricing, planning , designing and implementing technology solutions. In-depth knowledge of system’s delivery process and change management. Track record of managing multicultural and geographically disperse teams against tight deadlines.Specialties: Requirement management, IT Strategy, change management, IT project pricing and viability analysis, multi-site roll-out, business process automation

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