IT is key to future business growth
Published: 04 May 2007 16:28 BST
The role of information technology in a business has changed rapidly in the past five years. Since its conception, the primary goal of the IT department has been to improve efficiency and reduce cost. The emergence of the outsourced IT function, using a low-cost workforce to run low-impact operations, only enforced this view. However, those days are set to come to an end as cost-cutting, while still vital, is no longer enough. According to a recent survey by the Economist Intelligence Unit, 83 percent of chief executives now believe that within three years, IT's predominant purpose will be to enable revenue growth and actively drive business performance.
At present, many organisations still regard IT in a solely cost-cutting capacity. In order to maximise its potential, IT must be recognised as a transformational tool which, if managed effectively, can be used to maximise investment, while simultaneously achieving reduced cost and improve overall business performance.
Changing perceptions
The good news is that revenue contribution from IT can come in many forms. The most obvious method can be seen in the online environment, through state-of-the-art websites and complementary e-commerce channels. However, it can also be used to improve internal knowledge sharing, help share crucial intelligence across the enterprise, improve understanding of the customer base and tailor services to meet consumer demand. Mobile technologies are also delivering huge benefits enabling employees to stay in touch and react to opportunities faster than ever. In addition, collaboration with partners can be expanded far more easily so projects are completed more efficiently and in less time. Failure to create an adaptable IT framework can place your organisation in serious jeopardy, with those businesses who fail to appreciate the importance of IT to grow revenue likely to be left behind.
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The Economist's research also highlights that one of the challenges faced by organisations is the difference between chief executives and IT managers in how they see IT's future contribution to business goals. IT managers' day-to-day responsibilities have traditionally focused on operations management and reacting to recurring faults in poor system and applications design. When investment is made in implementing technology, it is often to cut costs rather than to support and enable business transformation. This gap in perception of what IT needs to deliver is a real hindrance in the alignment of business goals and technological operations.
Companies that continue to rely on the financial function to control IT must break with tradition — the starting point is for the chief executive to get actively involved in IT's management and communicate the evolved role he sees for the department. Organisational structures, too, are not designed to facilitate revenue growth, as customer-facing functions and the IT function have traditionally been very separate, making collaboration difficult. While the perceived potential of outsourced IT has only recently begun to change, landmark outsourcing deals have started to deliver genuine business value, proving how the application of a new approach to outsourcing can help organisations' IT investment fund revenue growth.
The outsourcing evolution
When the concept of outsourcing first emerged, clearly its real goal was cost-cutting. Imported, low-cost labour on temporary visas was used to supplement existing staff. The second generation corrected some of the limitations of the first, with work sent offshore while regional marketing offices representing the outsourcer were established to provide a degree of local contact and support. Cost-effectiveness immediately improved — through the offshore relocation — but the model was still insufficiently equipped to perform anything beyond basic engagements. In many cases early outsourcing deals failed because work was very poorly defined before being "thrown over the wall". When inadequate results were delivered, the immediate need to revise and resolve meant that any short-term cost savings disappeared.
So the model evolved once more: a stronger focus was again placed on local geographic and industry expertise, but with reducing operational costs still the primary objective. Local offices with project-management capability were set up to enable productive, day-to-day liaison and to resolve previous issues with poorly defined functional and technical specifications. With this model, outsourcing providers could be relied upon more to deliver complex projects that required significant ongoing discussions.
Today we're seeing a fourth-generation model, which puts long-term business impact at its core. Characterised by seamless integration between provider and customer, IT providers taking this approach combine…
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