The Only Five Times You Have to Spend on IT, and the One Time You Should Want To

by Gordon Wingate 

The most difficult decisions that business leaders have to make are about when and how much to spend on IT. Sometimes that decision is made only in desperation, when something goes down or starts running so slowly that work is not getting done. For everything else? Well, if you listen to your IT people, you should be spending half of your general and administrative expenses on replacing IT equipment and buying bigger internet pipes. In these situations, most often the “go or no go” decision falls on the business manager who typically does not know enough about the technology to be comfortable making the call. So decisions get put off until the next blowup. How can a nontechnical business manager make important financial and operational decisions about technology?

This question was tackled in the 1980s by the British government, who through their Central Computer and Telecommunications Agency developed a library of guidelines that came to be known as the Information Technology Infrastructure Library, or ITIL. The ITIL quickly found widespread adoption and provided a much needed model for structuring IT management processes, including financial issues.

The ITIL process model for IT service delivery identifies five categories you can use as a litmus test for making IT decisions. Simply put, if the proposed investment does not address one of these five needs, it is likely not necessary to help you “keep the lights on.”

#1. Availability Management

First and foremost, your entire company should be able to connect to whomever and whatever they need to get their jobs done. Email has to be up. Your critical applications have to be available to them along with all customer data. Systems need to run fast enough. People need to be able to connect from home or from their phones and tablets as you see fit. If the technologies your people and customers depend on are not available, business stops.

#2. Capacity Management

If a server runs out of storage, it will grind to a halt. Managing so that you have a cushion that prevents running out of space is therefore critical to your business. Spend as required to allow for a needed storage system expansion, or connections to support a new office and new users. Likewise, if a new application upgrade requires a bigger server or a faster internet connection, there is clearly a business justification.

#3. Financial Management

It may seem counterintuitive, but there are definite times when you should spend in the name of financial management. When an expenditure allows you to reduce IT support staff headcount or reduce your dependence on outside vendors, it clearly makes sense. In many cases, the cost of subscribing and moving to cloud solutions like Amazon Web Services is more than offset by the fact that you never have to purchase IT hardware, pay for data centers, or pay to install it, maintain it, or back it up ever again. A strategic cloud IT investment can also eliminate the unpredictable capital expenditures that always seem to arise at the least opportune times.

#4. IT Service Continuity Management (Disaster Readiness)

How will you work when your city or town is battered by a storm or your workforce has evacuated? If your office is destroyed, how will you conduct business until you can rebuild or relocate? In order to know your own risk tolerance, a prudent exercise is to calculate the cost of the loss of revenue for just a one-day failure. Then do a realistic risk assessment of your geographic and climate zones. A company in the Gulf or East Coast hurricane zone may be able to cost-justify disaster readiness very easily. As a side note, in the Amazon Web Services cloud, you don’t pay extra to always have your servers and data in two different data centers, so disaster readiness is not an issue.

#5. Service Level Management (Help Desk)

When your users have problems, does your IT help desk respond as quickly as needed? Do you have internal service level agreements (SLAs) to set expectations for help desk performance? Do you have a support services manager on board who is trained on and follows ITIL IT service management processes? Can he or she perform application upgrades safely and in a timely manner? In IT service management, accountability drives success. Invest in the tools and people to do this job right or it will always be a distraction.

Collaborating Effectively on Decisions

It is best to create a set of guidelines that will allow your IT infrastructure manager or your key IT resource to present information to you in a way that supports rapid and wise decision making. Go over these five decision criteria together. Your IT manager should be coached to present any proposed IT expenditure to you in terms of how it will improve or enhance one of these five areas. He or she should also understand that if a requested IT spend does not directly improve functioning in one of the five areas, it will not get any consideration.

For example, a server does not get replaced because it is “old”; it gets replaced only if it were to fail—service level management would be unable to meet the SLA for restoring availability. This would be because the manufacturer is no longer able to provide repair or a replacement. Over time, the IT manager should learn how to screen your decisions to eliminate the “nice to haves” from the “got to haves.” Through a collaborative model you can be more effective in making the right decisions.

The ONE Reason You Should Want to Spend on IT

Once you get past “keeping the lights on,” you should turn your discretionary IT and business development funds to the most important thing to any business: enhancing the customer experience, also known as the user experience or UX. Customers stay with you and new ones come on board if you provide easy, reliable, and fast technologies to allow them to do business with you. In our portal- and app-driven culture, customers stay with the best experience even if it is not the lowest cost option.

For example, the critical element in the success of Amazon’s retail operations is the ease of doing business with the site. The process works; it is easy, intuitive, and delivers consistent results. When its customers try other vendors, they often get inconsistent results that involve multiple phone calls and manual processes. This quickly brings customers back to Amazon. This focus on the UX is why Amazon is overwhelmingly now the most successful vendor in the cloud infrastructure space as well. The Wal-Mart of the web is rapidly becoming the Wal-Mart of IT.

Uber is successful simply because it is so easy to do business with it. Ordering a ride from your barstool or while waiting to get off the plane is an order of convenience that sets Uber apart. The Uber UX is predictably easy and consistent. And, of course, Uber was born and lives in the Amazon cloud so it doesn’t have the distraction of maintaining its own equipment. The lesson of Web 3.0 is that your technology focus should be on building applications that deliver an exceptional user experience to your market.

What will be your competitive advantage? How will convenience keep your customers loyal?

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