IT strategy: More baubles

’Tis the season to be jolly. As we near the end of this most singular of years, which has seen our financial system tremble in the shockwaves from the worst economic crisis since the Great Depression, the generosity of many enterprises is staggering. We are not talking about Christmas largesse here, but the billions of pounds being splashed out on information technology that has little or no benefit for the splashers.

Quite how many billions of pounds is open to question as there are more estimates on IT spend than a gaggle of pundits could shake a bundle of sticks at. But all those studies agree we are talking about vast amounts of dosh: the sort of money that would keep your average Russian oligarch in aluminium mines, dinners with retired cabinet ministers and premiership football clubs.

Even the latest estimates from IT analyst firm Gartner,which have recently been savagely downgraded in light of the worsening economic turmoil, forecast that global IT spending will reach a whopping $3.5 trillion next year. This represents growth of 2.3% year on year in even this most dismal of financial climates.

You might be forgiven for thinking that, in this chilly financial climate, IT expenditure must centre on critical technologies that absolutely cannot be avoided. You might also be forgiven for thinking that, over and above these must-haves, there will only be a relatively small volume of nice-to-have offerings ­ the technologies which can deliver tangible business benefits and fast return on investment ­ that will be approved.

And it is certainly true that, as we predicated at the start of the year, firms are being forced to tighten their IT belts. Many big ticket upgrades have been shut down and operational budgets for hardware in particular ­ but also for software, telecoms and services ­ are facing cuts of varying degrees. It would seem that this reining in of spending is occurring not just across the US and western Europe, but emerging regions as well. This is all very well, but is it a bit late to be starting that process at this stage?

For too many firms the cut backs are simply not being targeted effectively. The problem for many enterprises is that IT is quite literally out of control. Recently published research based on a global survey of 749 CEO and CIO-level executives commissioned by the non-profit, independent IT Governance Institute (ITGI) paints a disturbing, but not wholly unexpected picture. It warns that many firms are wasting money on IT because they simply do not know what their IT is doing to help their core business.

The scale of this disconnect revealed by the study is staggering. It notes that 40% of the organisations surveyed said they were not convinced that their businesses were getting significant value from IT activities.

This dismal report then moves to the plainly disturbing. It states that one in five organisations “do not determine their IT resource requirements based on business priorities”. So what do they base them on? The phases of the moons of Jupiter? The entrails of a recently deceased chicken? Mystic Meg? Midnight séance sessions in the server room?

Keeping up the disturbing theme, ITGI’s research points out that 54% of respondents have implemented, or are in the process of implementing, performance measurement for IT. This means 46% have not implemented, or are not in the process of implementing, performance management for IT.

It is amazing that this lesson seems so hard for enterprises to learn. It is basic common sense, not a proposition of Wittgenstein. Improved IT governance is the name of the game. Only firms that have developed coherent ways of monitoring technology performance can ever hope to be able to measure the effectiveness of their IT systems.

Such organisations are able to determine if they are getting value for money from their technology spending and identify where additional spending can do most good. They are also best placed to find out what IT systems they will be better off getting rid of entirely.

In this column throughout 2008, I’ve flagged up various crackpot schemes or new-fangled things the IT world churns out regularly to keep businesses confused and spending in fear and loathing as they search for the holy grail of competitive advantage. In our September issue, I talked about information overload and digital addiction. ITGI’s study shows companies, at best, not buying the hype: at worst, it showed how many of them were just lost and losing out.

It comes as no surprise that ITGI found the best performing and most innovative companies were those that were getting the best performance and business value from their IT expenditure. These are the firms that recognise IT should be fundamental to their business and that the right technology can be a potent weapon to deliver real competitive advantage. These are the firms that are most likely to weather the current economic storm and still be around to celebrate next Christmas. I am less optimistic about the ones that spend long, lonely nights in the server room with a telescope, a chicken and Mystic Meg.