SLASH BUDGETS, CRASH SYSTEMS – ACCENTURE WARNS
Avoiding the 'austerity trap'
In July 2005, global management consulting and technology services company Accenture published a new report entitled 'IT Investing for High Performance'. After surveying over 300 CIOs in the U.S, UK, France, Germany, Italy and Argentina, Accenture concluded that short term reductions in IT costs are leading to more time and money being spent in the long term fixing legacy systems.
As a result of the research, Accenture stated that the quest to contain spending on IT frequently backfires. It forces companies and governments with ageing and outmoded legacy systems to instead increase expenditures on IT maintenance, repairs and other unproductive practices. Many companies also launch labour-cutting initiatives that contribute further to lost productivity, while failing to achieve the intended savings. Thus a downward spiral results.
Accenture concluded that, "the universal goal of using IT to achieve more with less remains elusive, as survey respondents cited an inability to close the gap between goals and results." The company has coined a phrase for this effect - the 'austerity trap'. This lures companies and governments into believing that they can freeze – or even cut – IT budgets while maintaining the same level of service.
Accenture said, "a rise in costly government-mandated compliance requirements and, for some companies, increased expenses associated with the post-merger integration of IT systems has combined with the austerity trap to form a 'perfect storm' that is diverting IT budgets, often leaving an inadequate amount of capital for investing in controllable earnings growth and productivity".
So what is Logicalis' view on these findings? Ian Cook, CEO, Logicalis European Operations, talks us though them:
"Accenture has brought up a very serious point and most observers of the IT scene would concur with its analysis. But despite the fact that cutting budgets appears to have the opposite effect to that desired, it's inevitable that boardrooms are losing patience and freezing investment in the way they have."
"I believe this is because IT departments are so often viewed by management as a technical domain where a group of internal specialists' time is taken up building, maintaining and repairing systems and where normal business rules don't apply. IT departments go along with this and a mutual lack of comprehension causes the strange and contradictory effects that Accenture has observed."
"It's time to break this vicious circle. The IT industry should learn from the experiences of other suppliers to business who as their own industries matured changed their relationship with business. Just as auditors evolved into management consultants and hauliers evolved into logistics specialists, IT has to increase its value and relevancy to board level decision makers."
"The industry now should view itself increasingly not as a supplier of technical equipment and associated maintenance services but being in the business of working with CIOs to supplying 'best value' computing power delivered as managed services to boards against specific business level agreements, using technology to enable businesses. This will propel IT from being viewed as a back-office function to having a 'core' strategic relationship that is understood by the board to be indispensable to achieving the business mission and clearly accountable for doing so."
"Suppliers talking the language of the board and ensuring that the impact of IT can be measured against commercial metrics will ensure that companies get the IT systems they need. We'll then see a welcome end to the 'austerity gap' and avoid any 'perfect storms' in future."