Should IT be considered as a cost or an investment?

If your organisation was a person, which of the following would be most appropriate?

• A – Goes to the best gym and wants everyone to know about it
• B – Has his own home gym and wants to let everyone know about it
• C – Is in great shape and makes no mention of where she works out.
• D – Is unfamiliar with the concept of exercise.

Interesting. Anyway there is a lot of discussion around whether IT should be regarded as an investment or a cost to be managed. The terms investment and cost being ciphers for ‘We see IT as extremely important to our ongoing success’ and ‘We see IT as an expensive necessity’ respectively.

The IT investment proponents argue that IT is the future and that one cannot expect to get a competitive edge if one does not own and control the underlying IT assets.

The cost management proponents argue that the rapidly changing technology marketplace makes investing in technology unwise. The ‘assets’ decrease in value far too quickly and thus it is better to pay for the use of someone else’s technology. Presumably the service provider will enjoy economies of scale that allow them to make a living from owning technology. In the extreme, cost management proponents will argue that IT does not deliver any competitive advantage and so doesn’t warrant any strategic consideration. So it should be outsourced much like the catering and cleaning.

So is a cost oriented approach more preferable? Well for some organisations yes, particularly where the market is mature. But certain companies compete in hazardous and somewhat uncharted terrain. What they require will not necessarily be available as a service. The military is a good example of this. Their kit needs to be ruggedised and tailored for extreme working conditions. Commercial laptops would fail at the slightest hint of sand or snow. Though some commercial laptops do come with incendiary capability, which may well have warfare value. Despite this the military still leave the technology development to third party organisations, believing that core business for them is war/peace.

Despite my logic drifting in favour of cost management, or at least leaving IT to the experts, I still have a lingering feeling that the cost versus investment argument is a red herring. Revisiting the gym question above:

• Person A might also take a service-oriented approach to their IT investment. The big name suppliers might suggest this person is a fashion victim, and thus is susceptible to becoming easily decoupled from their money.
• Person B might prefer to stockpile technology assets in-house. They love an arms race. They may even believe that their large IT investment is in itself enough to give them a competitive advantage.
• Person C appears to be more focused on the results than the kit. They are less likely to concern themselves with the technology. Their focus is more on business value.
• Person D appears to be hermetically sealed from the modern world. Their long-term prospects do not look good.

In my view an organisation that focuses on what IT can do for their users and customers will yield better value from their IT investment than those that take a technology-centric view.

In conclusion the cost versus investment argument misses the point. Those that find succour in self-help tomes of an intimate nature will know only too well that ‘it ain’t what you have, it’s what you do with it’.

 

Ade McCormack

Ade McCormack (ade@auridian.com) is founder of Auridian. He is also author of the acclaimed book ‘IT Demystified  - The IT handbook for business professionals’.