Gartner warns two thirds of IT spending is 'dead money'
- 11 October, 2006 08:31
Claiming that IT spending is not contributing to business growth, Gartner said yesterday that eight out of every ten dollars spent is "dead money".
Gartner fellow and managing vice president Daryl Plummer said IT leaders need to demonstrate business value.
"We say 'dead money' because, while it is keeping the lights on, it isn't directly contributing to your business growth or enhancing your competitive advantage," Plummer said.
"In today's environment, any corporate function that doesn't contribute to growth or competitiveness is ultimately expendable. Your placement of resources is more critical than ever to your ability to deliver the growth and competitive advantage that your CEO is expecting."
Plummer said at least two-thirds of all IT spending is just to sustain the business, not to change or transform the business.
" The investments allocated to do new things, to change the business, are usually low, no more than 20 percent, and the investment in innovations which could transform the business is even less," he said.
"The challenge for IT leaders is to get their budget from 80 percent "keeping the lights on" to 60 percent or less, so they can use that money in new ways to drive growth."
Part of the problem is lack of collaboration between business and IT.
A recent Gartner EXP survey showed that half of CIOs said business didn't know what it wants or didn't collaborate with IT.
Gartner vice president Audrey Apfel said IT has to take the initiative to start spending their budgets differently.
"IT leaders need to think differently about how to make the right investment decisions and to measure their value," Apfel said. Gartner identified three ways IT can spend their dollars differently.
The first is intelligent reinvestment.
"When IT leaders save real money, immediately tag it for future investment in a particular area or against a particular strategic business goal; don't just cut costs," he said.
The second strategy identified by Gartner is to 'seize the day'.
"In some very key business initiatives, IT can and should lead. For some of these top initiatives, IT organisations have the skills in these areas, so they shouldn't wait for tomorrow, they should seize the day," Apfel said.
"Finally, make the connection. Make sure value is measured, discussed and managed - not in discrete project packets with unsuitable metrics such as return on investment (ROI), but with an eye on linking and integrating the technological past, present and future for your enterprise."
Gartner said the focus should be on disciplines that ensure IT assets are well managed with more effective oversight and mechanisms.
These disciplines include: leading change; governance; program and portfolio management; architecture; and risk management. Effective IT leaders have to be able to do all these disciplines.
Apfel said if an IT leader's infrastructure is inconsistent, and their architecture and project and portfolio management aren't working, their governance will never work.
"They won't be considering the right questions, let alone making the right decisions," he said.
"If these leaders can't manage change, they can't make the business investments pay off, because even if the technology works, the business won't use it. Lastly, if a company can't manage risk, they open themselves to catastrophe."