Mailbag: Are companies taking the strategy out of IT?

I hit a raw nerve in a recent article, “Are companies taking the strategy out of IT?” In it, I talked about companies focused on cutting costs that may not be considering the long-term effects of their actions. I’ve received feedback from readers, some agreeing and some disagreeing with my views, and thought I’d share some of their thoughts.

One reader, a network systems analyst, agreed with the article, saying:

“I wholeheartedly agree that a strategic IT plan is paramount and is an integral part of the overall business plan. I think a lot of businesses are not looking far enough ahead to realize the benefit of a strategic implementation of IT processes for their key management objectives/goals. The end results will be businesses playing catch-up, loss of personnel and most importantly loss of revenue. ROI should not be taken lightly – but it should not be shortsighted either.”

Another reader expresses the need to go beyond ROI for analyzing IT investments:

“Corporations view IT as a department that consumes capital while bringing in zero revenue… As a direct response IT has worked harder than ever on ROI to justify projects – which is exactly the wrong approach. ROI is simply a [profit/loss] statement when purchasing a technical solution, where managers attempt to calculate the overall run rate, not the cost, for IT operations. It doesn’t matter if it’s to replace aging hardware, provide new services that users demand or enable business operations to improve, it’s still capital.”

He goes on to say that risk assessment is more important than ROI:

“Risk assessment provides management with the information to identify and weigh all projects against one another, and organize them by importance and risk to the company. By identifying the major risks affecting a company’s information resources, IT management can create strategic initiatives to solve issues… Risk assessment identifies what needs to be addressed; ROI shows how the chosen solution will fit on your books. Many times risk assessment shows that IT must solve an issue, yet ROI shows that the project cost doesn’t fit in budget. This in turn requires managers to develop a different solution, to re-evaluate the importance and risk of all projects, or it justifies to decision-makers that the projects warrant defined budget requests.”

Yet another reader felt that companies are in fact taking a strategic view:

“I work as Senior Systems Analyst responding to RFPs, analyzing customers’ requirements and providing solutions. Now 70% of the requirements I come across have clearly stated objectives for floating the RFPs, both from a long- and short-term perspective. In fact, in many requirements I come across, customers’ intent is that the vendor/supplier must become a strategic IT solutions provider for the company. Barring few excesses or under-spendings, I have little reason to believe that IT and strategy is not in harmony – most of the big firms have it right or are discovering the right approach.”

This reader had something to say about ROI:

“I find lots of salespeople still want to have an ROI for their product so they can bandy it about. A real ROI can only be devised when a solution is used in a particular environment, and all the changes it generates should feed in to the calculations. Cost savings are only a part; revenue generation, prices and business volumes, labour and material productivity, stock savings, creditor and debtor management – all can be affected by business process changes. To ignore these issues can mean that what looks good on the surface could be damaging underneath. A good ROI should also look at the long term as well as the short. Developing an ROI should make you think about all the issues, and pick out all the business benefits as well as the downsides.”

Finally, we have a reader’s comments from the government sector:

“While businesses are resorting to illogical measures to reduce cost and harming their own business’ structures, consider the government sector, where being illogical is the norm. My state is suffering from an overspending problem that has put the state deep in the red, and all because logic is not a property the governor, legislators, managers, etc., have. Politics must prevail, and when one operates under this premise, new hand-me-down programs emerge in a deficit state that further erode our coffers.”

Thanks to these readers for sharing their perspectives on keeping the strategy in IT decisions during touch economic times.