Professor Martin Healey is close to the edge
There is a substantial part of most companies budget spent on IT.
It is impossible to work out just how much is spent these days
because the phrase 'Information Technology' covers everything from
business critical data processing, to word processing, and
everything in between. In the distant past IT focussed entirely on
data processing, and that was controlled by an IT department. As a
result all spending could be identified, and accounted for. But
today IT is embedded in most sectors of business, and costs can
easily be miscalculated.
The lack of understanding of the real returns from investments in
IT are obvious, and have been for some years. Because modern
systems involve individual computers, either PCs or NCs of some
sort, the cost of ownership can be disguised. For years the PC was
claimed to be a cheap alternative to an expensive mainframe, and
yet study after study (with no exceptions!) showed that the true
cost of ownership per user was at least double that of the older
systems. Of course the newer systems with Gui interfacing are
easier to use, and thus more productive than the old character
based terminals; the point is that in reality the GUI based systems
cost more, but are more productive. A simple business decision,
therefore, one would assume; there should have been no need to make
fallacious claims of 'lower costs', and so there should be some
questions asked as to how such stupid practices were allowed to
flourish. One must wonder about the competence of financial
directors around the world that they were so easily mislead. The
answer probably is that no large organisation had any methodology
for evaluating spending in such a decentralised fashion, and divide
and conquer ruled the day.
Once started excessive spending on IT is difficult to stop, and
even today there are few signs of anyone working out the true value
to an organisation, and making a sound business case for
investment.
Of course this problem is not restricted to the purchase of PC
systems. The value to a business of the last two upgrades to
Microsoft Office is negligible; indeed the software has become so
top heavy, and clumsy, that for many (most?) users there is a
negative value. The upgrades are justified because, without them,
the older software is incompatible with the new release, and few
companies appear to have the infrastructure to resist this move.
But the same argument applies to business critical systems. There
has been vast spending on the replacement of various older data
processing systems with 'integrated' ERP systems, but I don't hear
many glowing comments about the success of these changes, indeed
quite a few people claim that the complexities are counter
productive. It remains to be seen whether or not the latest trends,
enforced by new e-commerce requirements, will be easier to handle
with new ERP systems, or whether the nightmare of incompatibility
is rearing its ugly head again.
Intriguing situation
But the most intriguing situation,
so far, has cropped up with CRM systems. It all began with the huge
success of WalMart, who exploited one of the earliest data
warehouses to better plan its stores. WalMart became the dominant
American superstore, and the investment in data warehousing was
claimed to be the major factor. Of course this cannot be proved; it
could simply have been due to better purchasing, or better store
locations, etc. But once the Data Warehouse concept had been
exposed, then there was no choice. All other retailers had to
follow suit. But once that happened, then WalMart had lost their
initial advantage. Thus they had to try and move ahead by
exploiting their lead, and making better use of the data. From
simple queries, techniques were developed for analysis, planning,
and, in particular, a focus on the customer. Again everyone else
followed suit, which helped the IT industry, but did it help the
retailers? Probably not, because since everyone is forced to follow
suit, just in case, then apart from short intervals, everyone
arrives at the same point, and there is no competitive advantage,
just a big bill!
Better service?
All this would be acceptable, however,
if it resulted in better service for everyone, but it hasn't. In
fact, one hears more complaints about customer dissatisfaction than
ever. Things are probably better in fact, but everyone is told of
massive improvements which the IT systems cannot deliver, resulting
in an apparent reduction in service.