CIO — IT’S A DIFFICULT TIME for enterprise IT. Many companies are feeling the weight of cost reduction pressures. No one knows exactly how much chopping and hacking will ultimately be required, so companies go through round after round of relatively small cuts. It’s difficult to think about deriving long-term business advantage from technology with these frequent budgetary bee stings. Yet we know that things will eventually turn around, and the steps taken during difficult times to position the organization could really pay off when economic life gets better.
Most organizations need a bifocal strategy with respect to enterprise IT: short-term cost reduction and long-term competitive positioning. Of course, bifocals can initially be disorienting. What makes for cost reduction is minimal functionality, standards, commonality and low expenditure of labor. What makes for competitive advantage is differentiation, a close fit with the business model and human effort to match strategies to systems. However, I see some near-term approaches that aren’t compromising long-term goals. I’ll also describe some further-out actions that don’t require a lot of spending?at least not today.
The Closer View
Cutting short-term costs with enterprise IT is not a new idea, and we can rely on some time-honored techniques: consolidation, outsourcing, process improvement and so on. Consoli-dation is perhaps the most promising candidate. Most large companies have implemented major enterprise systems with multiple instances or implementations. It’s likely that no great competitive damage will be done by consolidating instances across the organization, and consolidating will save on modification, maintenance, support and software licensing costs.
The cry will go up that "our business is different," but the same cries went up in many companies that put in only one or two instances from the beginning, and everything worked out. Some companies didn’t even consider the possibility early on that instances could be shared, so consolidation should be easy for them. One European company, for example, put in 400 different instances of SAP across its diverse businesses. I’m guessing that there might be enough meaningful variation in the company’s businesses to justify 10 or 20 different instances.
Even consolidating across single modules can save some bucks. A big U.S. bank, for example, let every major business unit decide on its own what systems it needed for human resources. Fortunately, every unit chose PeopleSoft software, but there are minor variations in implementations. Eliminating those variations and operating off one instance for the entire company could save a passel of money, and it’s highly unlikely that the company’s competitive advantage derives from its unique HR system implementations.
