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The strategic versus utility IT debate

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Strategic IT is a term that is easily bandied about but only deserves the monicker once business leaders adopt a significant mind-set change. And this change is based on one of the most hotly contested debates within organisations: budget. By Sameer Deans, GM at ThoughtWorks

The argument over allocation of the IT budget in particular is all too often constrained by a mentality that views IT projects as an expenditure item rather than a value-adding service that can help the business grow revenue. The grappling over scarce resources between the business and IT is an age-old tussle that destroys rather than creates value.

In order to move beyond this sticking point, it is essential that business leaders acknowledge that IT is not distinct from the business, or its objectives.

In the ideal scenario, organisations should be focusing their effort on work that will generate revenue for the business by delivering services that meets customer demands. This is a principle that applies not only to IT projects, but across all business units. Strategic IT is intended to look ahead and provide the organisation with competitive business advantage, while the utility IT work operates efficiently with minimum interference or need for damage control.

One of the most effective ways to develop a mind-set change within the business with regard to strategic IT projects is how success is measured. Traditionally, the IT team has been measured as a cost and is considered successful if it operates within budget. Strategic IT projects, by contrast, should be measured by how quickly new ideas are taken to the market or the return they generate for the business as a percentage of the expenditure.

This approach will also lead to efficiency as a focus on generating value takes precedence, rather than a focus on cost cutting.

Once the cost-centric mentality is abandoned, it is then also easier to make a judgement call on the development framework and project needs. This discussion will inevitably involve weighing up custom development against a packaged solution, which for most strategic IT projects will involve the former in some shape.

As such a project will be dictated by new business goals and possibly complex processes that quite likely fall outside of the ambit of existing packaged solutions, custom solutions in such cases offer an opportunity to create a competitive advantage.

In our experience, particularly in larger enterprises with multiple touch points, the total cost of ownership of package solutions rises due to the need for customisation, integration, maintenance and license costs.

Another factor that is often overlooked is the cost of the user experience – which becomes apparent if users baulk at a new system that either does not meet their needs or introduces additional steps to effectively complete the same process as before.

An additional advantage of custom development projects that employ an incremental release approach is that features can be rolled out that already start adding value to the business as the project progresses. A smart approach to budgeting can then be adopted, which is to fund these incremental releases rather than the entire project upfront.

In summary, if an organisation is able to leverage its strategic IT capability effectively, it can be a true differentiator for the organisation in the marketplace.