Spend IT: how to spend your IT budget

Three years ago almost to the day, Nicholas Carr rocked the technology world
when he wrote an article for the Harvard Business Review which claimed
that IT doesn’t matter. His argument? That technology was effectively a
commodity, therefore business leaders should look at how to minimise IT spend at
all cost. Why bother spending big on something that all your competitors had
access to, he asked, if, as a result, it couldn’t provide any competitive
advantage.

While I don’t pretend to agree with Carr’s point of view (I believe that
business leaders who don’t back substantial investments in IT will live to rue
the day), I do think that IT will be provided very differently in the future
than it is today.

Large companies should always invest substantial amounts in technology, but
if we take on board Carr’s assertions that IT has become so much of a commodity
that there is nothing to differentiate it from what your competitors can get
their hands on, then there is only one way in which to go: companies must return
to the dark days of bespoke software development and the adoption of so-called
‘bleeding-edge’ technologies. Which, at a glance, looks like several steps
backwards.

However, the development of common standards are (at least in theory)
providing developers with interoperable building blocks that can be used by
developers to create their own systems without worrying too much about the
underlying interoperability. And adopting bleeding-edge technologies doesn’t
have to mean putting your neck, and your company, on the line.

Rather than talented software developers being employed by the large software
companies or consultancy firms, there will be room for them to join the
corporate world in far greater numbers. It will be a way for larger companies to
ensure they stay one step ahead of the competition.

Businesses that operate in technology-intensive industries will always take
technology more seriously than those in technology-light sectors. So the banks
and large retailers, for example, will spend big on IT – both in adopting new
leading-edge systems as well as, in some cases spending substantial amounts on
research and development. But the truth is that most companies could benefit
from spending substantially more on their R&D efforts.

Admittedly, it’s rather a large leap of faith to back plans to invest
substantially in R&D, but, without it, businesses could well be missing out
on a massive competitive advantage further down the line.

But the only way that businesses will be able to use technology to their
competitive advantage is by unshackling and then boosting the IT department and
by encouraging the IT director, or chief information officer, to think
creatively about how their department could help the underlying goal of the
business.

And this could be in any one of several ways. It could be that employing, or
poaching, a hugely talented software engineer is the right decision for the
future success of your business. It could be that adopting a few bleeding edge
technologies to test their appropriateness to the business and taking the cost
on the chin is the way forward. Maybe outsourcing some aspects of your IT, while
substantially increasing in-house focus on specific areas, is the right way to
go. Whatever the ultimate answer, all have one thing in common – they demand an
autonomous, motivated and dynamic IT team to come up with the strategic vision
and then make it happen.

Although, in many circumstances, Carr could well be right – some IT needn’t
be looked upon as an investment – the key is for companies to highlight which
areas of their business can benefit the most from serious investment. This
effectively means working out the areas in which technology can do the most to
steal a march on the competition.

Tesco, for example, was an early adopter of radio frequency identification
tags. It helped it to keep greater control of stock and inventory and, as a
result, handed it an advantage over the competition. Those companies that handed
their executives a BlackBerry early, would have found productivity improve,
which again would have handed them a competitive advantage. Developing a bespoke
software package, which is designed to tackle a particular industry-specific
issue could well do the same, but to a much greater extent.

It used to be that any right-minded, caring parent would recommend their kids
become accountants (those that weren’t clever enough, of course, could always
become lawyers) but, nowadays, it might be better advice to recommend they
become techies because I can see an explosion in how they are viewed by the
corporate world.

At a conference I attended, the argument was put forward that, because
information was so central to the business, not only should your CIO have a seat
on the board, but the finance director should have a direct reporting line into
them.

Now that would be a turn up for the books, if you’ll excuse the pun.