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True Cost Of Commodity IT

Last week I got into a quick discussion on Twitter with Matt Ballantine (@ballantine70) and Mark Chillingworth (@mchillingworth) which ended up talking about the value of transparency being one of the largest factors changing the customer / supplier relationship as part of a move to a more digital marketplace.

It all started with a simple tweet from Matt around the amount of information a UK Courier, DPD, provide whilst your parcel is in their hands on its way to you.  I work as IT Director for a fulfilment firm and we send thousands of parcels a day – the performance of various carriers is never far from my mind; so I replied. DPD have a great reputation but aren’t cheap (from a sender’s point of view).

 

Matt sent me a link to an article he wrote back in November about how organisations can approach ‘digital’, development and IT.  The article is entitled “Digital Architecture Revisited,” and in it Matt describes a tool he likes to use to simplify where to make technology investments. I won’t recite it here (I encourage you to read the article), but essentially the opportunities for investment are divided into four sections based on how core to your business the activity is and then whether it is visible or invisible to your customer.

Digital Architecture - Matt Ballantine
Digital Architecture – Matt Ballantine

 

Invisible Support

I want to talk about the bottom left quadrant of this graph: Invisible Support.  This is where “traditional” IT departments operate, and where you can spend a lot of time for very little reward if you’re not careful.

In the article Matt makes the comment “Big ticket items like ERP systems, and IT infrastructure, sucked up all the cash…”  and this touched a nerve for me.  I’m in the throws of implementing a Microsoft Dynamics AX system, and it’s fair to say it’s a big ticket item and it’s sucking up cash.

The challenge from Matt’s model it is to try and get your IT operating in the top right corner – where your customer can see you working on your core activity.  This got me thinking about some of the decisions we’re making around our own ERP roll out.

You can create differentiation between your competitors and yourself by operating int he Visible/Core section of the model, but you I don’t believe you can be there until you’ve got the Invisible/Support section right. You have to have the ERP system and the infrastructure first to allow you to operate where you want to be for commercial reasons: DPD couldn’t be so transparent and well regarded if they didn’t have the infrastructure and systems to reliably deliver the information which started the conversation.

This sort of IT is what is referred to as “commodity IT” in many circles: it’s the desktop PCs, printers, network and systems which nearly every business has to do. If everyone has to do it (or similar to it) then why would you expend a lot of effort operating here? Why reinvent the wheel?  You wouldn’t…

… but then you need to make sure you’re buying the right size wheel.

The Cost Of Commodity IT

Providing this commodity IT is taken for granted, and as a good IT leader you’ll be wanting to get your resources operating in the top right as soon as you can.  If you “buy” the right sized wheel you can do this; but too often the success of this commodity IT is judged in terms like “on time,” “on budget” and “meets the specification.”

Of course you have to have control on cost, quality and time to deliver anything, even the commodity IT; but if you’re judging your day-to-day IT in these terms alone then you’re likely not getting the best from it.

We need to move to judging the commodity IT in terms of how it enables us to operate in a way which sets us apart from our competitors and delight our customers. Is your commodity IT an enabler?  If not then the true cost of it is much more than the £ and Hr you’ve spent on it… it’s a drag to getting the good stuff done.

As a real world example – how easily can you adapt your ERP system to provide a “surprise and delight” feature to your customers? If it is closed source, overly complex and/or requires a lot of consultant time to do so then no matter how on budget or on time it was it’s now having a very real negative cost to your organisation.

When we make decisions around day-to-day IT we need to do it with an eye on how it’ll get us into the top-right corner quicker…. because the top right corner is where the profit is.

2 thoughts on “True Cost Of Commodity IT

  1. Nice to see you being able to apply some of my thinking into your scenario, Craig!

    Was in conversation with a chum over the weekend about the difference between good and bad businesses and transparency of information, and I do wonder whether the old ERP model can do it when it comes to anything that’s important to the end client or customer. I’ve written a bit about it for my latest CIO column which should be coming out tomorrow here: http://www.cio.co.uk/blogs/digital-devolution/

  2. Thanks Matt. I’ve just read your latest column – I share your concerns about whether the old ERP model can cut it, but only insofar as cant it get there quickly enough. Fundamentally an organisation needs a robust system to run the business (as you say, look at HSBC last week), but you need to be able to get the information out of that system in a quick, easy and transparent manner. This is where traditional ERP models will struggle – historically little about them has been quick, easy or transparent and vendors / partners / ISVs have made good money of that position. Times are changing, ERP will have to change – perhaps the move to a cloud first model for ERP will help that (AX7 is Azure only in first release).

    Oh, and then we have to consider the InfoSec arguments around the transparency. Too often IT Departments are the internal seller of risk (rather than the seller of opportunity) when it comes to transparency, but’s that another blog for another day!

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