CIOs have wrestled with future proofing their IT infrastructure for years. Because hardware and its depreciation are part of the cost of IT services, business users and the CFO have focused on these as a critical part of calculating the value IT contributes toward corporate success. This is a short-term tactical view. The strategic view is one focused on sustainable value from IT services that enables the company to evolve its processes and business model to effectively to meet and anticipate a constantly changing market.
Obviously the bottom line is a key component of the value IT must deliver to the company. Accounting rules, often with built-in five or seven year assumptions on hardware life are at odds with the reality of obsolescence or severely reduced cost effectiveness in three years or less. As a result, much effort has gone into outsourcing, less for improved services than as a work-around for the “book value problem.” Cloud computing is now emerging as yet another and perhaps more satisfactory approach as it moves the focus from mitigating asset depreciation on the balance sheet to service delivery. While cost control is always important, targeting hardware costs distracts the discussion from business process efficiency and effectiveness that can and will create real sustainable value to ensure the company’s competitiveness in the long term.
The first generations of IT focused on automating manual tasks within existing manual processes to gain efficiencies. The rise of the spreadsheet gave us a view of the balance sheet and other financial information that was easy to share and update, with graphs and confidence that the numbers were added up correctly. Later we learned that directly replacing manual processes with equivalent automation didn’t necessarily produce the improvements hoped for. It wasn’t that people were slower or more error prone than machines, rather the processes themselves needed be redesigned to take advantage of automation. This gave rise to business process re-engineering, a misnomer as many processes weren’t engineered in the first place, rather grew in corners, scratched on the back of envelopes, or that’s the way Jane did it twenty years ago. The horror stories about large cost overruns from failed or late implementations of ERP / SCM / CRM systems show that for the most part, that’s as far as we’ve been able to go.
These approaches are still focused on tactical goals, solving yesterday’s problems for today, and won’t necessarily create sustainable value for the company. The challenge is to put in place systems that can evolve with the company’s needs as it responds to the ever changing market and that offer the capability for the company to drive the market in new directions. Does your CRM system already understand and integrate social media? If so, you’re ahead of most, but what about the next great thing? A more likely answer is that your CRM system is barely integrated into the rest of your systems and whatever social media presence you may have is still stand-alone. There’s a lot of tough work ahead.
CIOs must take the strategic view that IT infrastructure isn’t the hardware, software, cloud, or whatever is the technology de jour. The company’s IT infrastructure is the applications and tools that run the business. Future proofing them is a far more difficult task. The very specifications and assumptions that are critical to deliver improved capability also lock your company’s business processes into today’s environment that new technology and marketplace changes will make obsolete or not cost effective next week. That’s a paradigm we understand for hardware, but have yet to fully appreciate where it counts, in the delivery of business processes with sustainable corporate value.
A daunting task? Absolutely, but critical to the longer term success of your company. It’s about taking that mission statement and corporate strategic plan as a blueprint for today, not left to the five-year IT strategic plan to worry about what it really means in two or three years. It’s about continuing to educate yourself and your business users to think in the short term for the improvements and solutions to today’s problems to ensure that your company has a future. Equally important is a commitment to educate yourself and the rest of the C-level team on investing in the flexibility needed to deal with tomorrow’s market, regardless of what it may turn out to be.