IT Expenditure – The Cost Centre Focus   Leave a comment


For the majority of organisations, information technology is seen as a cost centre. Its seen solely through the lens of operational efficiency.

And so when viewed this way, the costs of running IT become important. How effective is the technology that is used, how efficient is it being used, and are there costs that can be pulled out?

For example, what are the licensing costs of the Microsoft suite of operating systems and applications? What of the annual subscription/renewal payments for the various line-of-business applications that are used? And are you up to date with the inventory of hardware and their annual warranty renewals?

And flowing from this, are all of these pieces of hardware and software up to date? Are they all necessary? Could things be done better?

A crucial piece of information that I have found that is often missing – what are the projections for growth? How much more bandwidth will you need over the next couple of years? Do you have much historical data on the usage of storage?

And then there is the staffing aspect.

Have you got the right skills in to do the job? Do you have enough people to do what is being asked? What is the workload like? Is the management structure in place fit for use?

And rather than ROI (return on investment), the financial approach for measuring should start with a conversation about TCO (total cost of ownership). For TCO is about operational effectiveness, its about measuring the financial impact of information technology expenditure.

So, it is a given that today’s organisations (for profit & not for profit) need information technology, and they need it to be running well. Yes costs need to be kept down, but IT is a cost of doing business. And like with any other business cost, the expenditure needs to be “business sensible”. When viewed through the cost centre lens, the information systems that are in place need to support the business aims. These systems need to not get in the way of effective business operations.

Thus, the technology supporting the creation, development and management and your organisation’s information does need to be effective and efficient.
For more, visit Dellium Advisory, follow on Twitter, connect using LinkedIn, or review my strategy and futures-centric blog.

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Posted September 15, 2014 by terop in Business Strategy, ICT Strategy, Policies

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