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14 April 2004
Optimising instead of cost-cutting gives firms competitive edge
Even organisations facing flat or declining IT budgets can still use IT to respond to competitive threats and leapfrog the opposition. According to international business process and IT services company Xansa, many organisations waste resources on ageing applications portfolios. Weeding out underperforming systems can free resources for reinvestment in areas which add genuine value to the business.
"Bizarrely, many of these applications can be switched off without any effect on the business at all,"
says Mike Martin, Xansa Market Development Director.
Optimising IT should not be about simply cutting costs, says Martin: "A spate of surveys have
questioned the value of IT investment, even suggesting that organisations which spend less on IT gain more competitive advantage from it," he says. "They're not more competitive because they spend less but because they manage their IT better."
Organisations do use focused IT investment to transform their industries or break into new markets.
But few organisations' IT budgets are spending on this type of investment.
"Most of the budget goes on applications which merely keep the organisation in line with the rest of the industry, or offer a temporary, but easily replicable advantage," says Martin. "Worse, the bulk of their IT resource is used to maintain existing applications rather than pushing the business ahead or reacting to competitive threats."
Martin believes that by adopting the right architecture, measurement and governance for their IT
portfolios, large organisations can free scarce resources to develop truly competition-beating systems.
Xansa's RACOR (Rapid Application Cost Optimisation Review) technique provides a quick and
effective way of assessing which systems can be retired, and which ones deserve reinvestment.
"We apply three filters: cost, value and risk, to segment an organisation's portfolio of applications,"
says Martin.
Low-cost, high value systems can simply be retired or consolidated. In one project carried out by
Xansa for a client with over 900 applications, around 40 per cent fell into this category. Other problem areas - applications which are low-cost but offer little value, or are valuable but expensive - go forward for review or replacement. The resources freed by this exercise can be reinvested in those low-cost, high value applications which can take the organisation far ahead of its rivals.
The final step is to implement a system of governance which can ensure that IT resources continue to be invested in these critical systems.
"Most businesses have teams of technologists who are focused on managing IT resources rather than responding to the challenges facing the business," says Martin. "If they are to focus on those areas that will really push the business forward, they need to be rewarded according to the same business drivers as the rest of the organisation."