Well, yes and no. The “where” makes all the difference on IT Value and ROI!
Discussions on IT spending often focus on the size of the investment. Does the size of your investment really make a difference? In other words, is there a direct correlation between investment size and IT value?
Thankfully, the correlation is more direct between “where” you spend your money – not “how much” you spend – and IT value.
- Some functional areas of investment are more profitable than others. For example, investment – of the same size – in CRM might be more profitable in one company than another. To find the right area, focus on your business model!
- Some technologies might bring “more bang for the buck” than others.
- Most importantly, investment in innovation will bring more than that in “keeping the lights on”
The first two points have been belabored in the endless discussions on IT Strategy and Enterprise Architecture planning so we are well severed to take a look at the third that no one seems to talk about.
Simply stated, there are three areas of IT investment:
1) Keeping the lights on
2) Regulatory
3) Innovation
The first is the investment one makes in operations and maintenance. This spend is a must to make sure you are, well, keeping the lights on! This investment is making sure that you are not losing yardage but also implies that you are stationary at the point you were. So you are holding ground – very important but not a really good situation if that is all you are doing!
Regulatory spending is to keep the company in business and its executives out of jail! This is also a must spend as one can tell – unless of course you are making “political contributions” (Non-Americans read: bribes. They are just legal in our country.) to the party in power. Then you have nothing to worry about! Again, this spending is really not moving the ball forward – you are holding ground.
The third category is the most important category to IT value. This is the spending on new capability – applications, infrastructure, and data. This is what creates the biggest bang for the buck.” This is the investment that helps you gain ground. Touch downs are scored when you move forward not when you stay on the line of scrimmage!
As you can tell, there is a very simple analysis that can tell you if your organization is creating value or has all its fingers plugging holes in the proverbial dike! Compare your spending in these categories with those last year. Is one category larger than the others? Is it the first or the third? If it is the first, then the dike is leaking. If it is the third, you da man or woman as the case may be!
