The team and I at Ventana Research through development of new research agendas for 2009 have identified business and technology thematic topics that will be critical to all organizations. These topics will be critical for business and IT to be more educated and savvy on how to leverage them for their organizations. These are our assertions and not just predictions for success in this year and we remain optimistic that business can drive significant change in how they use information and technology to advance their processes and people who operate them along with management who need better tools for being effective in their decisions.

IT Spending Effectiveness
As companies look to reduce IT spending as one response to the economic slowdown, they risk throwing the baby out with the bathwater – cutting back or eliminating spending on initiatives that have strategic value for the company. Our benchmark research has found that few companies are able to accurately identify how individual business units and their activities drive IT spending; without this understanding, cuts in IT expense tend to be across the board rather than prioritized. Lacking strategic clarity, IT departments scrap important new initiatives in favor of keeping creaky older systems that few line-of-business managers would pay for if they had the choice.

To be successful, corporations must have the tools to be able to determine what business value drives IT spending and use them in allocating IT dollars. They also must allow business unit managers greater freedom to choose which IT services they consume. Combined, the two will enable corporations to make more effective use of the IT dollars they spend. Because they are at the center of the allocation process, finance departments must drive the development of a more intelligent costing process and they must use the right tools to manage allocations.

Some form of activity-based costing (ABC) is necessary for charging IT costs. Line-of-business managers also must be able to evaluate the services they are getting from the IT department and to stop using them if they are not valuable enough. IT departments might feel challenged when their “customers” have greater direct control over what they are getting, but our benchmark research finds this apprehension is misplaced: Companies that have greater visibility into how they are spending their IT budget and that manage IT spending processes more carefully consistently rated their spending effectiveness higher, grew their IT budget faster and spent a higher percentage of it on innovation rather than keeping the lights on.

Are you IT dollars being used effectively?

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Regards,

Mark Smith
CEO & EVP Research