IT As A Savings, Not Cost, Center

IT Savings Data center savings
9 goals to help business owners build a cost efficient and effective IT infrastructure

 

Many business owners believe IT is a cost center and treat it as such. However, it should be viewed as a savings center and budgets approached with that in mind.  The reason to invest in IT is help drive revenues, increase customer loyalty, cut or contain costs, and/or improve productivity. These decisions should be about funding projects and operations for those reasons, not for IT's sake. Unfortunately, most small and midsized businesses forget that and get locked into budgetary battles based solely on costs. It is time to take a more intelligent approach to IT budgets.

Why IT Exists

Decisions to initially spend money on IT equipment and software are typically due the cost/benefit value proposition of IT for the areas being funded. Usually these initial expenditures were for solutions such as customer relationship management (CRM), email, enterprise resource planning (ERP), and payroll. Or it might have been tied to the research, development, marketing, or delivery of the company's products or services. Except for the high-cost ERP solutions, business people found it easy to justify the expenditures on the view that the IT offering was essential for business or that it was the least-cost, most-productive way of addressing the problem. However, over time add-ons and other applications were acquired–some integrating easily with existing programs and others requiring internal or consulting staff to modify so that it could integrate into the existing IT architecture.

What Robert Francis Group (RFG) frequently sees is IT architectures that are not really true architectures but a patchwork quilt of hardware and software products. This drives up the costs of development and operations. Business owners need to pour through the budgets year-over-year and for new projects ensure the optimal corporate solution is implemented, rather than the usual suboptimal tactical solution that is designed only to solve a particular problem without consideration of the overall impact.

A Better Approach to Funding IT

Business owners should examine their IT platforms with these nine goals in mind:

1. Increased automation–the less work performed by humans means fewer errors and potentially faster turnarounds. From an operations standpoint it would be ideal to reach a "lights out" data center center environment where there is no need for human intervention to get all of the work done.

2. Consolidation--multiple data centers (beyond two) are not usually necessary and the value of each data center should be scrutinized annually to ensure its continued existence makes sense. Data centers are not cheap to development or operate; thus, the fewer ones there are, the lower the cost structure. Similarly, running the same application on multiple small servers, each with its own database, is less efficient than executing the application on a much larger server. Where it may have made sense to have multiple servers years ago, it may no longer be true. Executives need to carefully evaluate the alternatives.

 

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About the author

Cal Braunstein

Mr. Braunstein serves as Chairman/CEO and Executive Director of Research at the Robert Frances Group (RFG). In addition to his corporate role, he helps his clients wrestle with a range of business, management, regulatory, and technology issues. 
He has deep and broad experience in business strategy management, business process management, enterprise systems architecture, financing, mission-critical systems, project and portfolio management, procurement, risk management, sustainability, and vendor management. Cal also chaired a Business Operational Risk Council whose membership consisted of a number of top global financial institutions.

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