Complexity, cost, and increasing competitive inertia create big problems for business IT departments, as we saw in part one of this series. In today’s post, David Spratt addresses what to do about it.

So where did we leave off, last post?

• Competitive advantage through Information Technology seems a thing of the past.
• Your business is loaded with technical debt – spending money on systems that add less and less value while costs continue to soar while nimble, more agile competitors grab your market share
• The IT department is full of people focussed on boxes that go ping and red flashing lights.
• A finance team that can’t see why the latest request for more investment in more fancy boxes makes any sense – and you agree with them!

What to do about technical debt and IT?

Let’s start with another story.

I recently met with members of New Zealand Cricket’s leadership at the completion of a strategic IT Review that I had been asked to conduct.

As we ran through the findings I raised the great Black Cap performances I had been privileged to watch recently. As we shared our obvious pleasure at the progress NZ Cricket has made in the last three or four years I naughtily asked,

“Does New Zealand Cricket design, manufacture and sell cricket bats?”
“Of course not,” came the reply. “It is not our core business. We are aiming to be a world class sporting organisation not a bat manufacturer.”
“So why then would you choose to own and operate your own IT”?

My point?

No matter what business you are in you should be actively questioning why you should own or operate IT services.

Should you own your IT Systems?

Let’s start with a simple question?

“What will I spend on IT over the next three years?”

No I am not asking you for a budget. Dig deep – check the balance sheet for depreciating IT assets – (add a new capital spend if they are approaching zero value). Find the actual time and materials charges from suppliers for the last two years. Check your licencing costs. Check maintenance and service charges from your top IT suppliers.

Ask yourself “Is this spend adding strategic value to my business?”

Now go to IT and ask for something that you would like to happen. A simple thing will suffice – like accessing your key systems from any location using a mobile device and an internet connection.

If the answer is “Tut, tut, hmmm, that depends – it’s not in the budget” then you KNOW you are in a technical debt trap and that the business has a real problem with competitive advantage or the lack of it.

So what to do? What to do?

Down the rabbit hole…

I could say:

• Find a new provider
• Appoint a new IT manager
• Automate your IT delivery systems
• Move everything to the cloud

The trouble is that none of these in themselves answer the simple question:

“How do I derive value from technology – especially IT systems?”

So let’s start there.

Identifying the solution to stagnant IT returns

Identify two categories of IT:

Category A.
Those that are legacy and are “table stakes” to doing business. Think email, calendars, Microsoft Office, HR systems and finance systems.

Category B.
Those that really add value to the business. Think systems that drive productivity on the shop floor, improve sales effectiveness, unique systems that are distinctive to your business and strike fear into the heart of your competitors.

Analyse category A. Legacy and Table Stakes systems

What are they costing you to own and maintain? Are they cost effective, efficiently run and securely delivered? How would you know if they were?

It’s time to outsource all this dross to the “best cost” provider. That usually means Software as a Service simply because owning the equipment and software that supports legacy services is neither core business nor an efficient use of your limited resources.

Office 365 and Xero are great examples of world class systems available at a much lower cost than doing it yourself. (Note – I don’t sell this stuff so this opinion is based on experience not vested interest.)

Analyse Category B. Systems that add unique business value and competitive advantage.

This is the gold and needs to be mined.

Ask yourself – Are these systems easily available to those that need them? For example, via a mobile phone or from home via an internet connection and a browser. To my important clients?

Are we maximising the value we could extract from them? Is the current system world class or at least Best of Breed?

It’s time to focus on investing where the business will benefit most.

But here is the catch.

Even Category B systems may not be creating enough value to set your business apart.

In the world today Industry IT Systems that you spent years developing are increasingly being made available over the internet via Software as a Service (The New Guard).

These emerging services are genuinely world class in terms of quality, security and availability. The issue is ANYONE can use them with only a few weeks, sometime even a few days, effort. These systems are also being used to do away with entire industries that once relied on them. This is called Continuous Disruption. For examples see below:

Where does this leave you? It leaves you with the day after yesterday.

If you currently own and operate IT today from both a legacy and strategic perspective, you should be regularly re-evaluating just where the value is and where it might will lie in the future.

If, when looking at your IT systems today, you can’t find the value then it simply does not exist!

With these two questions the journey begins.

What am I currently spending my money on in terms of IT?
Where is this creating value for my business?

For a real world example see next month for a case study in IT transformation at one of New Zealand’s most prominent export companies.

Now, let’s see if we can drop our technical debt and get those IT folks back to the Christmas party this year…

Missed part one? Discover the crux of the issue here.