Watch those IT costs

Accountants say Information Technology is the closest thing in business to a free lunch – and they should know.

The data is really uncontroversial – information technology can deliver improvements in quality, cost and timeliness in almost every business. The payback period of a well-executed IT project would usually be less than 3 years, with many closer to 12 to 18 months. Of course poorly executed IT projects mean that more than 60% of projects fail to achieve the expected return on investment.

A frustration with cost, agility and flexibility has led many business managers to take other approaches to technology enabling their staff. It is very possible to procure, configure and implement a sophisticated IT solution based in the cloud with the IT department as a mere bystander.

The business users have real skin in the game to keep costs down and to deliver the expected benefits. This may give them a better chance of success, but must be weighed against a lower level of IT project experience.

The proliferation of true business led IT projects must be a good thing. IT departments should be reconstructing their role to enable the shift – unfortunately most seem to be doing everything they can to stop it from happening.

One area that does need attention in this new world is the cost of IT.

On the face of it, cloud solutions appear good value. A system with a monthly fee of $50 per person per month only has to save 1 hour of work per month to break even. If the selected system is fit for purpose and well implemented, the $50 pales into insignificance.

Unfortunately the $50s add up if no-one is managing the costs. It is estimated that one third of cloud license fees is paid for but not used. When you add in multiple systems and a lack of rigour in turning hours saved into monetary benefit you start to get to serious numbers that should have the attention of the executives.

The IT department can help here. They have traditionally focussed heavily on cost control and should have good systems to manage licenses and make the real costs transparent.

The business users also need to develop project management skills to deliver on budget; and analysis and change skills to ensure the benefits really do materialize.

The key as always is intention. Before starting the project decide exactly what you want to achieve, use this intention to drive the implementation and ensure you extract the business improvements that you intended.

If you are looking for ROI, good analysis must surely come out close to the top!