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How to save 30% of your IT costs

IT (still)doesn't matter

Do you remember a chap called Nicholas Carr?

Well in 2003 he published an influential Harvard Business Review article entitled: “IT doesn't matter.” His argument was that, like electricity, or train transport, or courier services, IT had reached a stage where other IT specialist suppliers did it better and cheaper than the IT department inside your company could do. He said that IT was now a commodity, and any advantage that you gained from using that commodity could easily be replicated by your competition in a very short time.

Gosh, but people squealed! 

In fact the month after Carr’s “IT doesn't matter” article, there was an article in HBR, contributed to by academics and IT experts, fiercely rebutting Carr’s view. Think about that… How scared do you have to be to organise twenty experts, get their opinions, and demand right of reply from HBR, all within a month? It’s kind of like the reaction you’d expect from the pro-cigarette lobby - the people who stood to lose.

Turns out (like cigarettes) IT is harmful to your (financial) health. And yes, Nicholas Carr was right - IT doesn't matter!

But let’s drop the cigarette analogy - I can’t think of one positive use for them either.

IT is a commodity - more than ever before

Let’s pick up on the electricity, rail-roads, courier, furniture making, paper manufacture, razor blade making analogy. Someone else does it much better than you can or ever will do. IT has reached that stage too - someone else does it better than you!

The late Peter Drucker, a management guru who influenced generations of managers, said: “IT people will become bystanders rather than the superheroes inside their organisation because of their continued failure to deliver the “I” in “IT”.”

Now I'm saying: “If we fail to deliver the “I”, and someone else delivers the “T” much better and cheaper than we do, then what is the role of the IT department?”

How to save 30% of your IT costs

There are four things you have to do to save the money.

Accept that IT doesn't matter. What does matter is what I call ACT - Applied Competitive Technology. You should change your department name immediately. No seriously! Can’t do it? Join the crowd of ex-IT managers.

So let’s look at ACT.

Apply technology properly

Firstly; A = Applied.  Your department’s job now is to ask: “How is technology being used in our organisation?” The average use of any Application functionality is 30% - It is your job to get it up to 70% or more. It’s your job to sit  with users, travel on trucks, stand behind the counter, walk the floor, and find out what you’re denying - your company doesn't use what you provide very well. (They know this already). Then change how the company leverages its technology. (Oh and have a look at the “I” again - it’s actually an untapped resource in your organisation).

Use technology to create new products, markets, and channels

Secondly; C=competitive. Don’t believe Nicholas Carr - IT can change the game for your organisation. But you have to adopt agile and lean methods - If you’re not creating new products, reaching new markets, and using new channels using technology then you’re not using the competitive potential of the IT commodity properly. And you have to do this every two weeks! (Not in 18 month cycles).

Manage technology, don't do it

Thirdly; T=Technology. At last! But here’s the rub - only 20% of your activity must be about technology - and even then, not doing the technology. You should managethe suppliers who do it. After all we've agreed that they do it much better than you.

Change people

And what about the fourth thing to save your 30%? It’s people. And this is the hardest part - if your department has more than 20% technologists (and they must be tech managers!) then you've missed the boat. The rest of your staff are in your business, doing business, and leveraging technology.

How does this save you 30%?

If you do the “A”, then your company will use what it has, will ditch what it doesn't use, and will not buy new tech that it doesn't need. Count 10% cost saving here. And if you are really serious about the ‘A” you’ll get rid of your legacy for once and for all - there are many, many, many, tools and experts available to do this for you if you just have the “political will.” Count another 10% saving.

If you do the “C”, then whilst you won’t save, you should generate 10% more business... And make friends in the finance department too. And change your image from being the “abominable no-men” to being the “go-to” guys.

If you manage the “T” instead of doing the “T”, you’ll save at least 10%. They do it cheaper remember?

And if you reorganise, and re skill, rack up another 10% saving. You’ll need fewer specialists and more revenue focused staff.

Oops that equals 40% saving and 10% company revenue. So I under-promised.

This is a threat!

Don’t believe a 30% saving is possible? That’s OK. Others do believe, and will achieve the savings after you leave. If you think this is a threat… It is. But not by me - your business knows or is finding out, and will be asking the difficult questions soon.

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