Increasing IT Infrastructure Costs Reducing Ability To Change Business
With IT infrastructure costs increasing so dramatically the ability of IT to change the business and provide value is diminishing. Some recent systems I have seen have had over 90% of the costs dedicated to IT infrastructure and IT supporting services. The overall goal of IT should be to provide business value. Yet with these costs it is difficult to gain credibility around the opportunities to improve business. I read an interesting paper from Tata consulting that included a chart from Howard Rubin showing the growth of infrastructure and the shrinking of applications. Truly the value of IT is to improve business processes and increase earnings to the corporation. Yet in so many organizations IT is just a cost center. The Tata paper touches of methods of refocusing IT on proving business value.
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It could be that IT costs are rising proportionately because software costs are diminishing. That would be a ‘helpful’ trend in that cost savings are being realized in one segment. IT infrastructure also has strategic implications in and of itself, much as excellent roads and bridges do. That is why Microsoft, Google, Amazon, etc are engaged in major build outs because their IT infrastructure equals their ability to execute. Though HP went the other way, reducing their data centers to just a few. So if you are in the business of technology, then technological infrastructure is a good thing, but if you are in another business, then maybe you want to reduce that overhead.
As for those in the business of technology, a recent trade article mentioned that Bear Stearns’ and Lehman’s takeover prices were largely accounted for by their data centers’ value. They had built centers optimized for the high speed execution that wall street values. At least, it did