What’s the best single measure of IT success – increased productivity, or reduced spend? Two colleagues staked out opposite positions on this blog recently. As CIO at Appirio, naturally, my instinct is to cop out and say “both are important.” But let me be more specific.
Let’s think of IT as an athlete on our corporate team. We want lean, well-conditioned athletes at all positions. Getting a team ready to play means getting everyone in shape. The first step might be to set a goal weight. This goal will be different depending on the type of sport, and the position. An Olympic gymnast will likely have a very different goal weight than an NFL lineman. While there is no right or wrong goal weight, we all know that being overweight is never good for fitness.
Think of your total IT costs like your goal weight. It makes no sense to try to come up with a single number (e.g. “less than 3% of revenues”) that’s right for everyone. Set a target based on the kind of company you are, and the market you play in. Certain industries, such as financial services or consulting, naturally rely more heavily on tech spending than others, such as retail or construction.
Athlete can take both healthy and unhealthy steps towards reaching a goal weight. They can eat nutritious foods, or they can go on a starvation diet. CIOs also have healthy and unhealthy options. They can ensure funds are allocated towards technologies that yield the best returns, or they can cut essential productivity tools and defer needed upgrades in the single-focused pursuit of cost reduction.
Once you set a goal weight that’s right for your company, you’ll want to focus on your overall fitness level, and the abilities you derive from it. A good athlete eliminates wasted motion, improves technique, and is able to put most of their strength behind their action, whether it’s performing a backflip or swinging a bat. The IT equivalent is how you spend your limited IT budget, typically broken into three categories – run (nondiscretionary spend on continued operations), grow (supporting organic business growth), and transform (supporting new business models).
Gartner’s January 2012 “IT Metrics: IT Spending and Staffing Report” shows that, on average, 63% of our spend is on “run,” with only 21% on “grow” and 16% on “transform.” While these numbers are trending in the right direction – in 2007, they were 67%, 20%, and 13%, respectively – the amount of spend dedicated towards maintaining the status quo remains far too high in our industry. This is like a baseball player who isn’t leaning into the pitch and is hitting off the back foot. Instead of driving the ball, we’re limply popping out to the infield.
My own experience, both as Appirio CIO and as an adviser to many of our customers, is that shifting towards cloud computing enables a major focus shift away from “run” expenditures. Fewer people and resources are needed to keep the lights on, so the “build” and “transform” projects get more IT attention. I think we can flip the 63/37 ratio over the next several years by continuing the transformation towards public-cloud-enabled IT. It’s like a hitter who starts taking more solid swings at the ball, hits more line drives, and ultimately drives in more runs.
Therefore, the best single measure of IT success – assuming you’re at your goal weight and in peak physical condition (i.e. your IT spend is right-sized for your business) – is how much of your IT spend you’re able to put towards growing and transforming, rather than merely running, your business.