Three Popular Misconceptions about IT Investment

I was interviewed recently about IT trends in the air transport indutry.

The inevitable question came up as to levels of spending – are they going up or down in the Recession? are they enough? – the idea being, presumably,  that a headline will result from this like “Airlines cut IT investment” or “Airline CIO says not enough investment in IT”.   

This line of questioning made me think again about these issues and the constant fixation on what I believe are the essentially misconceived questions “How much is Company X spending?” or “How much is the Government going to cut?”, presumably for the edification of suppliers and IT salespeople.

In my view, these questions miss the point by miles, for three reasons:

First, people lump together in “IT spend” or IT investment” both real investment and spending on keeping the IT you have going or up-to-date.  The terms used, especially in political or journalistic statements, are terribly imprecise. 

There are several interesting question in here, but they are all very different. These are:

  • How much do you spend keeping your IT operations running to service level, and in a safe and secure manner?
  • How much does it cost for you to replace your hardware and infrastructure and renew software going out of support? and
  • What are you investing in IT that supports changing your business?

The question which any business should be strategically interested in is “How much are you investing in changing your business?” These days, most transformations are enabled by IT, whether they are revenue-generating, cost-saving or customer-delighting.

Second, when you look at a business transformation, the IT is only part of the equation. 

We all know that new IT systems – whether ERPs, CRMs, web sites or social networking – succeed or fail, not on whether the IT works, but on whether the processes are thought through and aligned with the IT, and – most importantly – on whether customers or colleagues can actually use it.  

So simply adding up the cost of the IT is quite meaningless.  “There are no IT projects, only business projects” – so the costs of any project should include involvement by the business, staff training, business process re-engineering: whatever it takes to deliver the whole change. 

Third and finally, the amount of spend and resources deployed has no correlation either with the success of a project or, indeed, with the business benefits delivered.  Some of the worst disasters have been the biggest projects – just look at some (by no means all) of the recent Government IT investments. In many ways, the larger and more complex a project is, the more likely it is to fail.  The use of Agile development methods has shown that small and frequent deliveries can give great business benefits for relatively small amounts of resources.

So, in summary, just adding up the amount of “IT Investment” is not going to tell you anything about whether it is worthwhile – or indeed a complete waste of money.

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