Bob is looking to purchase his first house. His ideal home is in a posh neighbourhood with white picket fences and costs a bargain 300K $. Sounds great so far and, by the way, the costs of upkeep are at 120k $ per year. Should Bob buy this house?
I don’t know about the rest of you, but I would think twice about it!
Replace Bob by Information Technology and you have essentially the way we have been selling IT assets (hardware and software) since the dawn of IT. Wait, it gets better, you get to do it again for software roughly every 3 to 5 years since the new version is so much better and cooler than the previous one! With hardware, at least, you can redeploy elsewhere or enrich your favourite IT guy’s personal “lab” !
A growing trend of CEO’s and CFO’s are asking tough questions along the lines. Why are we buying all of this “stuff”? What kind of value will it bring to the corporation’s bottom line. As an IT professional, you better be ready to answer. You can try the old, “but the new gear is like soooooo cool dude”, but take it from someone who has been there, it won’t fly! New technology assets should be rigorously measured against the tangible benefits preferably in the form of the equity return it provides to the corporation. If you can’t figure this out, your project is at risk.
The message here simple, IT needs to be visible. Visible in the sense that it provides true value, true strategic differentiators.
If it can’t provide strategic differentiators, then that business function is at risk of being outsourced. After all why should a CEO invest in something that may be important, but won’t provide anything in terms of competitiveness?
Where will that business function live? How about SalesForce, NetSuite, Microsoft Dynamics, Workday etc… if it’s a standard business process, chances are, a Software as Service offering exists somewhere.
Samy “TheBenz” Benzekry
Inspiration for this blog: one line in Paull Strassmann 1998 article on the value of Knowledge Capital.
“If someone would try to sell a house that requires an annual upkeep equal to a half of the purchase price, nobody would buy it. A rapidly deteriorating capital asset is not worth much. Yet the very high ratio of life-cycle maintenance costs to the original acquisition cost demonstrates that today’s application software is one of the flimsiest artifacts that management will ever buy.” (http://www.strassmann.com/pubs/valuekc/)