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1 March 2005

Cut your IT costs by 90%

By Andrew Clifford

Though it sounds unlikely, it is possible to cut IT costs by up to 90%. The key to this is managing IT demand. This isn't simply a matter of saying "no", but requires a reappraisal of the nature and value of IT.

What would you say if I claimed you could cut your IT costs by 90%?

You would probably dismiss it immediately. It can't be true. It doesn't make sense. If it was possible, everybody would be doing it.

But it is true.

How? By managing IT demand.

This doesn't mean just saying "no" to every request for IT. Managing demand involves:

  • Understanding what IT is and how it adds value.
  • Delivering only the IT that adds value.
  • Identifying and avoiding the pressures that lead to excessive IT costs.

How much you can save depends on you and your situation. You might be able to save 20%, 50%, 90%, or even 99%. Even a 5% saving would be worthwhile, wouldn't it?

I don't suppose you are convinced, so here is some food for thought.

Over the past few decades we have become much more efficient at supplying IT goods and services. And yet far from getting easier and less risky, IT has become more difficult and more risky.

Every day there are stories in the newspapers about major IT projects that have gone horribly wrong. Household names like Sainsbury's have been brought to their knees by IT system failure. The government is constantly embarrassed by high-profile projects like the Air Traffic Control systems. Studies [1] estimate that 84% of IT projects fail to meet their objectives, 91% in large organisations.

Surely IT shouldn't have these failures, and their associated costs. IT is based on the promise of efficiency. Every decade the cost of IT capacity decreases by orders of magnitude. Millions of talented people are employed in IT. IT has mature disciplines of software engineering, business analysis and project management. IT should, by now, be cheap, well understood, and low risk.

The main reason for all this waste is that we have only addressed part of the efficiency equation. We have learnt to supply IT very efficiently. But we have ignored demand efficiency. We never limit what we want. Gains in supply efficiency are eaten up by ever increasing demand.

Most of this demand is unnecessary. It does not benefit the people and organisations that it is meant to serve. It gets in the way. It adds time, complexity, cost, and risk. Global IT spend is now in excess of one trillion dollars. Doing away with excess demand could save a large part of this.

Over the coming weeks, this newsletter will probe deeply into the problems of excessive IT demand, and excessive IT solutions. It will show how to understand the true nature and value of IT, how to craft minimal IT solutions that meet the true demand, and avoid the pressures that lead to excessive IT costs.

Next week's newsletter will start by expanding on the true nature of IT, how it delivers value, and a simple way of checking whether you will really benefit from an IT system.

[1] Standish, quoted in Does IT Matter, by Nicholas G Carr, published by Harvard Business School Press.

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