Rising IT costs, don’t blame CIOs, it’s the users

Existing cost cutting drives by CIOs, which were a predominant focus during the credit crisis, are delivering savings of between eight and 15 per cent, but savings of 40 per cent could be achieved, according to Compass Management Consulting. 

Compass surveyed 240 CIO level IT leaders  for its report A clean slate, and found that the business is hampering the ability of the CIO to really cut costs because everyone and every department insists it is unique. In its study Compass found that significant savings are being missed because organisations demand customisation as well capacity that is then not used. 

The Compass research backs up the views of a growing number of CIOs who believe that the business has to align with IT. 

What is interesting about this research is that if you listen to vendor sales and marketing pitches, cloud computing is the panacea that will right all the wrongs of enterprise IT. Amongst the noise are claims that ‘it is the business’ that demands cloud computing and requires the instant on service like approach of cloud. But the Compass results demonstrate that the business is holding back CIO’s organisation because they make excessive demands, so nothing can be instantly delivered. 

Perhaps users react differently when commissioning technology resources from a vendor than they do an internal supplier. Which then advocates the need for IT to be outsourced, you could argue. 

Compass rightly point out cloud, and virtualisation, are platforms that deliver a utility and standardised IT service. The noise and there is demand for cloud computing does reflect, as the report states, a maturity in business for better ‘commercial agreements’ and service for the delivery of technology, but as the numbers from this report show, that maturity is not across the board.

What I will be interested to see and ask CIOs is: do you need to educate the organisation on just what is practical, effective and affordable when it comes to customisation and outcomes? Perhaps the answer to that will come from the CFO and CEO when they realise that technology costs are in effect falling, but IT spend in the organisation continues to rise. I’ll quote the experts here: 

“The trend line for IT spending continues to rise, despite the falls in hardware, software and service costs,” says Steve Tuppen co author of the report. “Although we have seen falls in storage unit costs of 83 per cent over the last five years, servers by 65 per cent and network unit cost declines of 36 per cent, these falls are far outweighed by the expense of over configuration, under utilisation..” 

So the CIO is spending less on goods, but cannot keep pace with the demands of the user. This is especially the case in under pressure areas like the public sectorwhere the cost reductions are rigid, but the rest of the organisation see IT as a way of reducing costs. 

Having read the report and met with Tuppen and co-author Nigel Hughes I’m beginning to wonder if the debate about standardisation and IT costs needs to include all three C-level pillars of the organisation.