Agility: Competing and Winning in a Tech-Savvy Marketplace

Chapter 5. BUSINESS IMPACT: TECHNOLOGY SOLUTIONS FROM THE SHOP FLOOR TO THE TOP FLOOR

Does your business view IT as a cost or as a creator of value? If IT expenditure is viewed as a necessary cost but not a critical business or production factor, is that approach a conscious strategy or simply a default? Driving down IT costs will deliver some tangible value to an organization. But what happens when there are no more costs to remove and/or your competition goes to the next level with technology to improve business competitiveness? When do we start to be penny wise and pound foolish?

In February 2009, the Harvard Business Review reported: "The power of IT reaches far beyond the technology itself. IT averages only about 5 percent of the total cost in a business. Shrinking IT cost by 50 percent will generate fewer savings than cutting business operations costs by 3 percent."^[36]

We have seen that the right investments into IT infrastructure help the core business. It also reduces the short- and long-term cost necessary to maintain the IT environment on which the rest of the organization depends. Let's look more at the upsides for the business. Increasing numbers of organizations and managers want to and expect to further leverage IT as a potential asset to create business value. This is especially true in an economic environment in which agility and lower costs are a key asset. But what are the appropriate IT capabilities and priorities? How do you align IT capabilities to improvements ...