Thinking inside the IT Cost Box

I am constantly surprised at the number of articles which talk about reducing the IT costs of an organisation by a certain percentage, say 20%. This appears to me to be thinking inside the box rather than outside.

IT should be viewed in the context of the value it delivers to the overall business not as a cost centre to the business. For example conversations such as “...it costs £100 million to run the IT in the business. We need to reduce this so you have an objective to reduce the cost by 10%....” are one dimensional. Where is the dimension of the value that the £100 million is providing to the business?

That £100 million could be delivering £500 million profit with an associated non-IT cost of £10 million to run manual processes and procedures. So what if we increased the IT costs to £110 million and invested in change that helped to increase the profits to £600 million and reduced the associated non-IT costs to £5 million. Overall by investing £10 million in IT we have increased profits for the business from £390 million to £485 million.

A simple example but it looks like good business sense to me.

So why do people still look at IT costs in isolation of the value delivered and are set challenges to reduce the cost of IT. The challenge should be how can we maximise the value delivered to the business by IT. Maybe it could be the lack of integrated thinking between business and IT? See my earlier blog on You Never hear of Business/Finance Alignment

Sounds simple and obvious so why do I still see those articles?