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Josep Valor , Professor, IESE, University of Navarra

More investment and less cost

Fri, 06 Aug 2010 08:16:48 +0000 Published in La Vanguardia (Barcelona)

Reducing costs has become the priority of most ICT managers in companies. However, postponing strategic decisions is not advisable.

Before this cycle comes to an end, companies must undertake a series of actions: incorporate the possibilities of ICTs into their business models; capitalize on the creativity of all employees and related parties; reorient the organization to customers; and implement an ICT governance system consistent with the above points. Today, the possibilities of ICT are endless. Savings in technology can be achieved through the absence of investment, of course, but also through the optimization of expense.

Cloud computing is a clear example of this. This technology offers software applications and services over the Internet that no longer reside on the desktop or specific servers. Because it requires only a browser, it eliminates underutilization costs and allows for peak demand without unbalancing the budget. It covers everything from simple applications, such as email offered by Yahoo, Google or Microsoft, to more sophisticated programs, such as Salesforce. com's customer management systems.

Technology can also make it easier to capitalize on employee creativity or reorient business to the customer. In this regard, Web 2.0 applications have proven to be powerful tools that are extraordinarily cost-effective and relatively easy to use.

For IBM, for example, it has meant the entrance of 46,000 new ideas from 150,000 employees, customers and partners via an extranet. Of these, ten initiatives have been funded and implemented.

business thus encourages its employees to take the initiative and establishes close ties and dialogue with customers, demonstrating to them the importance of their opinion. At the same time, it ensures that innovation moves from the bottom up, so that all employees at business can bring new ideas to the attention of top management.

Lastly, it is necessary to set up effective systems of management of ICTs. First, it is necessary to be aware of the biases that characterize the operational research centers (CIOs). Their decisions, which they often have to make with incomplete information, are influenced by the behavior of group of reference letter or corporate reputation, and technical and economic criteria are sometimes diluted. On the other hand, due to the importance that the systems they manage have on business continuity, CIOs have a high aversion to change. And they may tend to use technical measures (bit rates, gigabytes, etc.) that need to be replaced by business terms.

These management systems should be governed by an ICT committee that, on a quarterly basis, oversees systems plans, strategic implementations, major vendors and business recovery plans. It should include senior executives - including the general director and the CIO - external, non-executive members of the management committee and at least one other ICT expert.

At final, it is time, through these four actions, to turn the current approach to costs and do radically different things.