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What's IT worth?
June 01, 2005
Becky Blalock, CIO of Southern Company, the big Atlanta-based electric utility, suffers no delusions of grandeur about her role. "This company is not in the IT business, so we'll always be a stepchild here," she tells Richard Pastore of CIO Magazine. That no-nonsense attitude says a lot about Southern's success in doing what many companies are afraid to do: charging IT costs back to individual business units. Blalock and her predecessor Tom Fanning have been fine-tuning their chargeback system for seven years, and the results, writes Pastore, "have been transformative." IT costs have fallen substantially, while user satisfaction with the IT department has jumped to 4.6 on a scale of 1 to 5. Most important, business managers now have the precise cost data they need to make smart decisions about IT investments. And the company as a whole is in a position to make rational decisions about what to outsource and what to keep inside. This is a case study that any IT manager will find well worth reading - and maybe even emulating.
Comments
The analysis of IT as a utility is skewed. In some aspects of business say office applications - word processing, spreadsheet, etc there has been more bells and whistle than substance in most of the upgrades and new releases. The product updates we have seen lately do not come with major innovation to the user. The OEMs are more concerned about making their presence felt and seen than real substance. And the annual spend on IT may be questioned.
However, for enterprise applications IT certainly matthers. For a fortune 100 company with global operations, the ability to stay ahead of the competition, maintain cost competitiveness, bring results from the research lab to the market place is greatly enhanced by IT. IT is not just a utility for such organizations, but a partner in the business processes improvement, fraud detection, controls and operational intergrity, etc.
One of the ways most organizations could avoid the pitfall of huge spend on IT projects with little ROI is by not being an early adopter of new technology. It is more important for an organization to establish benchmark for new upgrades and IT spend than focusing solely on cutting cost. IT is no longer just a tool or an expense item on the budget but a strategic partner to the business. Organizations that have learnt to harness this power are usually ahead of their competitor.
Posted by: Aniefiok Orok at June 7, 2005 05:59 AM
I am more in agreement with Mr. Carr than the previous comment. For a fortune 100 with global operations, all of the above does indeed matter - but it is in the internal processes and analyses, not where you plug it in.
When you plug a lamp ito your house - you do not need an on-staff electrician to maintain it. Your needs and budget may say Tiffany or it may say Wal-Mart, but if you want a lamp, you buy a lamp. If the electricity does not work - call an electrician.
So why should an enterprise application have 1000 people on site(s) supporting all the "electricity" (hardware, OS, middleware, database etc etc ...) if your process and business analysts can just put together what their needs are to give you that competitive position in costs, market etc.
That is not to say that IT is not required - in fact I believe that in most enterprises of all sizes, IT is table stakes to the survival card game. But as detailed by Mr. Carr, it is how it is managed that provides compteitive advantage.
Since about 1980, every automobile manufactured in North America has had more computer power than the Apollo moon landing. Most cars have between 20 & 50 processors of different types. Do you care? Not really, again features & budget may say Cadillac or Lexus vs. Pontiac or Toyota, but the underlying "IT" that supports those desired features are hardly relavant.
As what we traditionally call IT comes more invisible througher newer standards (and ones that don't exist yet) we won't care whether it is a SOA or re-useable component of type "x-y-z". We want our business processes to manipulate and build processes and process improvements. In my opinion we will not care about the lower level plumbing that allows us to build and consume them.
Posted by: Elliot Ross at June 7, 2005 03:03 PM
I am a Phd student of Chinese Academic of Sciences, in May 2005 I wrote a series of paper about your paper "Does IT matter?".
You can access it at my blog http://oliver25.blogchina.com
The files about "Does IT Matter?" are located at
http://oliver25.blogchina.com/1498534.html
http://oliver25.blogchina.com/1498559.html
http://oliver25.blogchina.com/1498576.html
http://oliver25.blogchina.com/1498649.html
http://oliver25.blogchina.com/1498666.html
http://oliver25.blogchina.com/1498694.html
http://oliver25.blogchina.com/1498742.html
http://oliver25.blogchina.com/1498767.html
http://oliver25.blogchina.com/1498801.html
Hope to keep in communication!
Best wishes!
Posted by: oliver at June 12, 2005 09:56 AM
Shouldn't you warn people that they must first learn Chinese (Mandarin or Cantonese)?
Posted by: Tella Puli at June 14, 2005 04:17 PM
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