IT's efficient, but what about the costs?

While IT managers increasingly focus on operational efficiency, many are discovering how little they know about their actual IT costs.

Compass Management Consulting estimates that up to 50 per cent of a large organisation's IT spend does not appear in the IT budget.

Rather, various business units manage myriad IT costs, accounting for them as 'external services', 'support', or in other non IT-specific terms.

Compass managing director Rawdon Simon said a series of high-level calculations of servers, desktops per server, number of WAN locations, network devices per user, and other measures can provide a useful set of 'rules of thumb' regarding IT costs.

"This approach involves a low level of precision and a wide margin of error -- it's not a sufficient basis for action. However, it does allow you to ask questions and to gain insight into the things you may not know about your operation," he said.

One immediate benefit of an IT audit can be to reveal easily realisable opportunities to centralise and standardise certain functions.

Simon said that, more importantly it provides a big-picture assessment to understand an organisation's workload.

"That is the key to meaningful performance improvement and better ROI; once you understand workload in a particular area of IT, you can either perform that workload faster, or reduce the amount of workload," he said.

"IT claims to get cheaper every year, yet total IT spend goes up every year. That's because workload is increasing as a result of business demand. The challenge is to manage the workload more effectively."

A survey of 100 CIOs released this month by Merrill Lyunch & Co. has found companies are trying to reduce the percentage of revenue they devote to IT spending.

Respondent companies said they now devote on average 5 per cent of their total revenue to IT spending, and 62 per cent of them are trying to shrink the percentage of revenue they spend on IT, "which suggests a lid to spending improvement in 2003", according to the survey.

Respondents overwhelmingly identified the need for vendors to support standards, claiming it is extremely important to them, because it allows IT departments to integrate products and avoid getting locked into one vendor's products.

- With Juan Carlos Perez

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