Typically, big companies invest one percent to four percent of revenue in IT. This investment is usually spent on integrated business model implementations, continuous innovations, and day-to-day IT operations. There must be a way to assess and take full advantage on the return of these investments; otherwise, IT organizations cannot move from being cost centers to value centers. Optimizing the value of IT is a top priority in today’s tough economy. Companies rush to reduce IT operating cost and IT capital expenditures mainly because of falling revenue sources.
Many companies are so focused on evolution in order to always be steps ahead of competitors. They, at times, push themselves hard through IT implementations and afterwards, fail to take advantage of the benefits. They resort to old habits, making change process difficult to achieve.
Once you implement new systems and processes, you need to aggressively drive value creation from it. Peter Weill, in his book IT Savvy wrote, “The firms that are best at this start driving value early. If you start driving value early as you take the first small steps towards building it, you will reduce the disruptions of major transformation. The goal should be—build a little, benefit a lot; build some more, benefit some more; and so on.” 1 In other words, keep it simple! Now is probably the best time to resort to this time-tested principle where investment is placed only on IT solutions that are cost effective and that deliver better value and greater performance for the business. Below are just some key initiatives that can help organizations maximize value of IT in a company.
Define Clear Strategic Vision
The first step is to have clarity of strategic vision for each of your IT portfolios. Executive managers in Steering Committees have the responsibility to clearly define the main business objectives of projects and portfolio of projects. They are the ultimate architects for the organizational transformation that will happen. The objectives that they define will guide IT project leaders in their decision making and will help them prioritize business requirements.
Maximize ERP systems
Most big firms implement a digitized platform anchored on a major piece of purchased enterprise resource planning software such as SAP and Oracle. Implementation should be kept within the standard configuration as much as possible. This is a difficult challenge though. Of course, some business requirements cannot be addressed by standard functionalities. They will have to be developed or coded to change standard functionalities of the application to suit business needs. The challenge is to keep the balance between benefits and costs of these developments. Keeping solution within the platform configuration standards will reduce consulting cost, configuration and development effort. In the long run it will reduce cost of IT operation and application support. Additionally, companies can leverage on continuous evolution of those ERP platforms whenever new releases and versions become available. They can change to the new version without lengthy and costly upgrade process.
IT Infrastructure Consolidation
Data center consolidation is a major focus of many organizations today. According to Computer Economics, in 2008, 76% of organizations had some level of activity in the area of data center consolidation. It is one of the most essential ways to lower the cost of IT operations. Bigger data centers are simply more cost-effective on a per unit basis. Therefore, for many organizations, consolidating multiple data centers into a single facility should be a primary strategy for cutting cost. Additionally, this consolidation effort can also result to mitigating risk and improving service levels. Concentrating computing resources into one or a small number of physical locations can boost the productivity of IT assets and personnel. It will also simplify IT operations management. Most organizations will realize quantifiable returns from such efforts.
1 Weill, Peter. IT Savvy: What Top Executives Must Know to Go from Pain to Gain. 2009.
#Perspectives 
Thanks Paco:
Very few companies can effectively use ERP right out of the box. It must be modified to suit their needs, and this process can be both expensive and tedious. However, I agree with you, the level of change and development has to be controlled.
If we allow changes to go out of control, like when code changes (in core programs) are introduced easily, in the long run, it will be difficult to maintain and get support from the vendor. It will difficult to leverage on continuous evolution of those ERP platforms whenever new releases and versions become available.
Like what I said in the article, the challenge is to drive value early, and one way to drive value early is to ensure that we use standard functionalities already in-place and take advantage of embedded best practices and processes.
Regards,
Glenn
Glenn,
I think that many companies considered the decision about an ERP wihtout really respecting what was the kind of strategic decision they took. At the end, they build a kind of legacy, that is, a big chunk of software plenty of changes to adapt the original software to their own requirements.
In my opinion that is a big mistake. If you end up with a commercial ERP (SAP, Oracle, Peoplesoft, JDE, Baan, etc) with more than 20% (just to mention a figure) of customized changes…what do you really have ? That’s not an ERP, that is YOUR ERP !!!!!
My recommendation is the following simple (easy to say, difficult to make it real) statement: if you want an ERP then you want the processes made by others, so you have to adapt your own processes to the ones supported by the corresponding “state-of-the-art” in such ERP offering.
Regards,
Paco