By Leslie Blair
Ernst & Young LLP
As posted on Baseline Magazine
Organizations search for ways to optimize the value delivered by its investments.
Given our turbulent economic environment, cost reduction is a top-of-mind issue for executives. Many organizations are aggressively working to reduce their technology spend; many are also working to drive costs out of their business functions by improving the way they use IT. And almost every enterprise is looking for ways to optimize the value delivered by its IT spend. Regardless of the desired outcome, cost-reduction imperatives are easier said than done.
In fact, a 2007 study by Tata Consultancy Services (“IT Effectiveness: Leading IT Practices in Successful Companies”) showed that 62 percent of organizations experienced IT projects that failed to meet their schedules; 49 percent suffered from budget overruns; 47 percent had higher than expected maintenance costs; and 41 percent failed to deliver the expected business value and ROI. Given statistics such as these, how can business executives expect to reduce their IT costs and reconcile their IT spend with the business value it delivers?
Many times, reconciliation of cost and value becomes a source of conflict between the business and IT organizations. As the role of IT continues to evolve—and new technologies continue to add capability and complexity to an already challenging landscape—it is critical for executives to come to terms with IT costs and develop a game plan to maximize the value derived from their IT spend. To understand how IT supports their businesses, executives need answers to the following questions:
• Do our IT projects reflect the goals and objectives of our enterprise?
• Are IT programs and project sponsors held accountable for the success of the programs?
• Is there a way to reduce IT costs without negatively affecting our operations?
• Are we realizing the value we expected from our information technology investments?
• What actions can we take to better predict and control our IT expenditures?
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