Hidden Profits Blog

Do you feel like the Information Technology (IT) bills never stop coming?  It seems like there are always upgrades, maintenance costs, new software that must be purchased.  The question becomes ‘What Value Do We Receive From That Investment?’ That is actually a very good question.  Most IT executives would answer that there is almost 100% uptime, business transactions are processed with stunning accuracy and speed, employees have access to recent releases of Office software to better do their jobs, everyone has email with near 100% uptime, response time is quick and everyone has smartphones with email.  All  that is true and important, I mean just think of how the average office worker would do their job without email, MS Office and the standard accounting system used  in business. 

However, the value of Information Technology (IT) should go much further than that, especially today.  We have instant connectivity to the internet almost anywhere and from devices that we hold in our hand.  We use those devices to access our personal information instantly while many busy executives still wait until the end of the month and later to access critical business information.  In our personal lives we interact with each other quickly and learn more about each other than ever before with social media. Yet companies still have limited interaction with suppliers and sometimes customers.  

 In order to move to the next level of IT value there are 4 key areas that should be addressed.

1. Real time information for better informed decision making
2. Information provided suppliers to improve supply chain and customers in the form of new or add-on products and services
3. Optimized business operations and back-office from increased use of technology
4. Innovative interaction and collaboration with suppliers, partners and customers 

In many cases companies already have the technology to add value in these four areas but there is a lack of communication between IT and business and often a lack of innovative thought on the part of both business and IT to address these opportunities.  The reality is businesses that add technology value in these four areas will be the businesses that stand out, attract customers, attract ‘A’ level talent and become more profitable.

I will address each of these value opportunities in subsequent posts.  If you would like an evaluation of how your company can increase value in these areas, call us at 818-709-6583  for a free 90 minute consultation. 

Most CEO’s and CFO’s of companies of all sizes would say that IT expenses are too high and they are not convinced that they receive value for what they spend.  CIO’s today spend a significant amount of time focusing on reducing costs and explaining the value of IT projects to the business.  While it is always a good idea to find ways to get the same value at a reduced cost and IT has alot of room to reduce costs, just cost cutting is not the optimum way to support the business.  In fact frequently a focus strictly on cost cutting will result long term lost value of IT.

The reality is that new technologies and IT business solutions have come together in the last few years to really provide the long term promise of enabling IT to increase revenue, reduce costs and increase productivity in businesses.  This situation has resulted in the new focus of aligning IT with business goals.  In a recent blog post I discussed the reasons to create an IT Strategy and that is certainly the beginning of ensuring that IT is aligned with the business strategy.

http://www.hiddenprofitsblog.com/what-is-an-it-an-it-strategy-or-it-roadmap-and-why-do-i-need-one

The IT strategy is the first step. The next step after the IT Strategy is to define the projects, create budgets, obtain approvals and architect the solutions so all the pieces fit together to fulfill the strategy.  This is generally where the strategy and alignment falls apart.

So how to ensure the strategy and plan come to fruition and bring the expected value to the business?  First, I recommend the company  create a board of executive management that includes the CIO, to define project priorities and requirements for project business cases and review project progress. 

Second is to manage all of IT – ongoing maintenance, new projects and infrastructure as a unit so the executive board can see how all the projects fit together.  The IT department basically has 2 tracks – investment in new systems and functions and projects to sustain existing systems.  Create separate budgets for existing system maintenance and new investment.  Group the new projects into major programs that work together as a group. Then bring the two together to define the entire IT budget.  The consolidated portfolio should include an overall picture of how each project fits into the company strategy and what existing systems and costs will be phased out as each new project is brought online. 

This approach enables all of management to see the global picture of IT initiatives and expenditures and for CIOs to manage expectations.