Managing Costs vs. Solving Business Problems


I recently read an interesting McKinsey Quarterly article on Managing IT during a downturn. IT spending and costs, like so many business functions, wax and wane with business cycles. Spending increases gradually over time before a shock or other external event occurs requiring significant and rapid cost cuts.

The current downturn is no different but what has been changing is IT teams are finally becoming more creative in how they view costs. Instead of the parochial focus on IT specific costs the best businesses are looking at IT and trying to determine where judicious investments in IT can help drive costs out of the business and increase revenue.

Outsourcing was once the panacea for all problems in IT – Lack of excellence? Outsource! Costs too high? Outsource! No Expertise? Outsource! Outsourcing for those reasons are more valid than ever but it’s a rare IT staff that hasn’t already started outsourcing, nor is it usually possible to entirely outsource your way to business excellence. Sure the aspects of their business that they outsource will hopefully be well-run, but what will be missing is the opportunity to bring an internal IT team’s  technology expertise to bear to solve a business problem.

For example inventory is a challenge for many retailers – not the actual taking of the inventory (because it’s often been outsourced) but the length of time it takes and the amount of work it requires in order to get ready for it. But more problematic is the static nature of the results in a very dynamic environment. RFID is one example of a technology that seems to be be expensive with little practical use for many businesses. But what if a clothing retailer could conduct inventory every single day in the store using only a scan-gun and one staff member for one hour? Saving time and improving accuracy while allowing for better pricing, increased revenue and improved loss prevention. This is possible today and businesses are starting to use these and other technologies not just to cut costs, but to drive EBIT.  And an IT team that can help drive EBIT by a few percentage points will be a highly valued part of any business.

Check out the article for yourself.  So how does your business and IT team think about costs, investments and solving business problems? -t

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