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Role of IT in the Current Economic Environment

5 Mar 2013 12:00 AM | Anonymous

The macro-economic crisis of 2008 had a major impact globally across organizations – mainly because they were unaware with the speed and the magnitude of the financial meltdown. Management at all levels of organizations was mostly caught unawares when they had to deal with the relentless decline in their organizations’ financials - top line, margins, stock prices etc.

In order to cope with the situation, most CEOs chose the most obvious route and opted to ‘cut’ costs. In a majority of the organisations, IT (Information Technology) investments have traditionally been perceived cost intensive, primarily due to lack of understanding of the benefits by the senior business executives. And more importantly due to the CIO’s inability to articulate and quantify the clear business benefits that the organisations were getting from the IT spends, which on average equated to between 2% to 3% of the overall budget.

As a result, IT became a major focus area for “cost cutting” and further evidence of this came in the form of the changes in the CIO’s organization. Since the crisis began, the reporting line of the CIO in a lot of cases moved from the COO to the CFO, to manage the cost cuts. IT deployments across industries were slotted into two distinct buckets – “Run the Business” and “Change the Business”.

“Run the Business” (RTB), also known as “Keeping the Lights on” – did just enough to ensure that the IT organizations met their obligations to the business and kept the IT services running. This included the entire stack – from underlying IT infrastructure, platform and applications. The general directive across organizations was to cut down the cost of RTB between 25% to 30% and in most cases also leverage the saving for “Change the Business” (CTB) initiatives which are in line with organizational priorities.

The CTB initiative was a new experience to the IT departments as they were not used to working closely enough with the business to be able to understand the requirements specified. The rapid pace of change was another challenge for the IT departments. The days of long drawn out projects had effectively ended. Business wanted a clear ROI in a short duration and they needed someone who inherently understood what the business wanted.

The macro-economic crisis has shaped IT departments into nimble units that can have a clear understanding of the business, and the ability to demonstrate ROI, while keeping the existing costs under check. Some steps taken towards this by the IT departments include, hiring strong business managers who have a strong appreciation of the business and technology, and with strong program and project management capabilities to become more agile in their delivery. And more importantly, these managers could identify growth pockets, leveraging technology, to add to the organization’s top line.

This has been and continues to be a long journey and a lot of work still needs be done to reach an Utopian stage, where IT is perceived as a business imperative and not just a necessary evil.

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