How much IT is right?

IT Spend is one of the most discussed topics among corporates and IT organizations today. It had been a fashion to boast IT spend figures before the IT bubble burst when it was presented in a manner to show the speed and attitude of organizations. Not anymore. The speed, attitude, one-upmanship is replaced with accountability. Corporations today expect an IT organization to be accountable to the business.

Hence, two key questions posing challenges to top IT executives are:

• What should be the optimal level of IT spending for the organization?
• How can IT be a transformation agent to deliver maximum value against investments?

Sometimes the discussion is around how optimized an organization’s IT Spend is; on other occasions the IT spend is compared and benchmarked to understand the degree to which an organization is IT savvy. However everyone is grappling with one question - “How much IT is right”. The answer can be as simple as comparing it with available benchmarks or it could be as difficult as computing it bottoms up. Unfortunately, there is no single and simple answer.

What in your opinion could be the right answer for this and how important it is for CIO to estimate what IT Spend should be communicate and targetted for the organization?

Do you ignore "Value" while outsourcing?

It is not a new story that CIOs are under pressure to reduce cost. However does that mean in the rush to reduce the cost, IT's contribution have become less important? Absolutely not. In fact, business is looking towards IT not only to enable the business functions but also grow up to become a transformational agent.

To reduce cost, one of the most favoured and proven method taken is outsourcing. Outsourcing has become a reality and is not a matter of choice anymore. To be competitive, CIO must have an outsourcing strategy is place.

Risk comes second in taking CIO's atention. While CIOs have mandate to reduce cost, they are to mitigate the risks well to avoid any unfortunate impact on business. Service Provides have also put in place the means to help organizations mitigate such risks.

However the issues is with the third key element, that is, Value. While organizations, in the rush to offshore and make IT staff lean, are often left helpless when it comes to taking new initiatives. Service Providers in an attempt to provide most cost effective deals, also do not develop bandwidth to provide support in new strategic initiatives. This realization while comes little late, it strucks hard. I call this "Two Years Itch". After 2 years when benefits of offshoring are realized, its time for CIO to take next big step. And this is the time when reality hits hard when CIO in desparate need to provide IT's new contribution, finds very thin internal as well service providers' support.

I have been party to one of the review where client organizations, despite being fairly satisfied with the services being delivered, kept on blaming the service provide for not being able to provide any value.

I wondered, if it was a limitation of outsourcing as a concept or outsourcing as a contract. I would say it is outsourcing contract. CIO's in order to sign the most cost effective deals, often ignore the need to have best deal. A best deal must have "Value" component in it. Service Providers cannot suddently start delivering value. They have their own challanges such as timely delivery, meeting SLA, high utilization and profitability.

Service Providers must be treated as partners while signing such an agreement. Apart from delivery and engagament competence, service provide must put transformational competence on the table as well. And most importantly, put a structure in place which will continuously look for new improvement area to keep IT optimized for cost, risks and value.

Will such deals be most cost effective? May be not to begine with, however spending additional five percent might go a long way and in fact improve the ROI by putting transformational gains as deliverables.