Bad management of IT assets costs UK £17bn

UK businesses could be losing up to £17bn a year because they fail to manage their IT assets properly, according to a survey of...

UK businesses could be losing up to £17bn a year because they fail to manage their IT assets properly, according to a survey of 200 directors and senior managers.

Ensuring more effective procurement and management of hardware and software would lead to "significant cost savings", according to IT consultancy KPMG, which conducted the research.

Almost half of the respondents had no idea how much their annual IT budget was and 80% did not know what, if any, cost savings they were making by managing their IT assets.

With an annual IT spend of £43bn by UK companies, and using analysts' figures which estimate that between 10% and 40% of IT costs can be saved by improved asset management, KPMG said potential wastage could be as much as £17bn - equivalent to half of what the government takes in corporation tax.

The main reasons for this waste, according to KPMG, were "renegade" purchasing outside the authorised IT budget; a lack of any managerial accountability for the area; bureaucratic and complex procurement processes; and a failure to consider the question at board level.

KPMG said there was evidence to suggest that many organisations had "absolutely no idea" of what IT/IS assets they had or where they were. It found that one of its clients had an unco-ordinated and decentralised method of purchasing with the result that it had bought three separate e-mail systems which were not linked together.

Another client, an investment bank, said that it could easily save £20m a year by managing its IT assets properly, but that this "was nowhere near the top of its agenda".

To gain a greater degree of control over their IT budgets, organisations can take a number of steps immediately, according to Paul Diamond, director of information risk management at KPMG.

"First, make a list of all the hardware and software in the organisation - is it really necessary and is it all licensed?" he said. "Businesses can make significant cost savings simply by doing an inventory - one company saved £1m after one day's work."

Diamond also recommended appointing a senior manager who would have authority over all IT asset management and licensing matters, be accountable to the board and be rewarded in proportion to cost savings achieved.

Other important steps, Diamond said, are to appoint one or two trusted suppliers and insist that all purchases go through them, while putting mechanisms in place to proactively manage this area.

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