* Economy forces companies to make tactical decisions, rather than strategic
The economy has been in the doldrums for far too long. Like the “horse latitudes” that got their name from ships having to throw dead horses into the sea when they were caught without any winds (in the doldrums) for too long, I believe companies today are experiencing a kind of modern-day “horse latitude” phenomenon. Are we throwing IT “horses” overboard in response to the doldrums of the economy?
We’ve heard the stories of companies “doing more with less,” demanding efficiency from IT, squeezing out operating expenses. And we hear of companies requiring ROI justification for projects, with shortened payback periods. Even further, companies are requiring that approved projects are shorter in length – six months or less.
While there was some need to drive out waste and excess, there is a point where this becomes counterproductive when taking a long-term view. Companies are responding to the economic conditions with short-term tactics, rather than long-term strategy.
ROI and payback are merely ways to compare IT investments. While these numbers are useful, “soft” factors should also be considered. For example, if one investment could provide a revenue stream, that must be considered as a part of evaluating the investment. Putting money there might make more sense than spending the money on something that may have a higher ROI or payback but has limited strategic value to the business.
Many companies consider their IT organizations and infrastructure as strategic to the business. Consider what would happen to your company if you were to shut down several important servers for a week (without the benefit of disaster recovery or redundancy, for the sake of argument). The core business of the company may grind to a halt or it might be seriously crippled. And that’s not strategic? Look all around you, technology enables and is the conduit for business – I call that strategic.
Are companies that forego investments today to save money handing over competitive advantage to competitors? Are cuts being made to increase today’s bottom line (by reducing costs) at the expense of tomorrow’s revenue?
It appears that many companies are making their cuts and their investments without a strategic plan in place. In a recent study by Enterprise Management Associates, we found that a large majority of companies do not have a business plan that includes an IT investment plan. And of those few that had an IT investment plan, many of them didn’t refer to it. That’s how you take the strategy out of IT – force cuts in expenses and investments without regard to a strategic business plan. It’s a shortsighted approach, and in many cases the driving force is not coming from the IT organization, but from above.
IT is strategic to the business, and it should be treated as a strategic investment rather than as a cost or expense that can be whittled away without any effects on the business.
I’d like to give you a chance to sound off on this topic. What’s happening in your company? Please send your thoughts to me at mailto:Rasmussen@emausa.com
Please use “Strategic” as the subject line. If I receive enough responses, I will do a follow-up to this article.
