Jan 14, 2009

is it logical ? ? not to me

Today I visited a client whose IT budget is no more than 1.6% of its revenues. His boss asked him to cut 20% of the capital investment and 10% of the operational budget (a total of 10% compared to budget 2008). 
In order to do this the company will stop projects that could have increased revenues, some that could reduce costs and some cuts would increase the risk of IT failures. 
Now my thoughts: 
by cutting .16% of revenues (as expenses) the company lost much more.
Does it make sense to cut IT without a real analysis??????? 
I cannot understand the logic...........  any comments ??????

1 comment:

Akiva Marks said...

Clearly this company has designated IT as a pure expense center and utility service provider. As far as the business management is concerned, IT is no different than:

Facilities Management - Tell them to cut and they can eliminate the office plants and cut back on window cleaning.

Cleaning Service - Tell them to cut back and have a somewhat less clean office.

In this mindset, from IT... the network won't be any faster next year, the business doesn't really care. Desktop computers may be changed less often, again the business doesn't really care.

This client's IT department has failed to explain or demonstrate that they offer a business _advantage_, rather than just being a necessary burden for operation. The CIO and senior IT management practices have allowed the business to categorize them as expendable.

The result in the U.S. of such a positioning has sometimes been complete outsourcing of the IT department (to companies such as EDS or IBM GS).

- Akiva Marks, SRL
- MakingSOAWork.blogspot.com