Language
Most of the IT budget
is not spent on business innovation
Unbelievably, on average 4.5% of all revenues of large
companies are being spent on Information and Communication Technology. Of that
4.5% only 1.4% of it is dedicated to business innovation and new initiatives,
the rest, 3.1%, is just spent year in and year out on “Keeping the Lights On.”
This means that literally billions of Euros, Pounds or Dollars spent on ICT
(people and assets) are not delivering any business productivity improvement
or, even worse, no business transformation. This is not a sustainable state of
affairs in the new economy within which we find ourselves. Forrester defines
this expenditure as MOOSE or Maintain the Organization, Operations, Systems and
Equipment.
The IT cost per
employee is embarrassing – without business improvement
If you think of the 4.5% of revenues in terms of
total GDP then it is clear that we
are talking about a staggering number. Some industry sectors are worse than
others, take Financial services; on average the spend
is 13% of Revenues in ICT, that means that 9% of Revenues are spent without
delivering any incremental improvement
on the way a company is run. This in fact becomes an embarrassingly large
number on a per employee basis. For example in Banking and Finance over €24,000
a year per employee are spent on ICT with €17,000 not delivering any
improvement for the very productivity of the employee and business. Compare
this figure with $50 per year per employee for a Google Enterprise complete set
of personal productivity tools or $ 400 per year per employee per year for a
complete Cloud CRM application of
Salesforce.com. Or, as you will come to understand, 50 $
per employee per year for usage of the Cordys Platform as a Service.
On
time and on budget? Mostly
not…
Worse, research from Forrester suggests the average length of
ICT projects in large companies is around 22 Months and that these projects are
missing the deadlines at a rate of 49% and tend to be 22% longer to
deploy and 17% more expensive than budgeted.
Worse, as the belt needs to be tightened, leaders are increasingly cutting the innovation and productivity generating part of the investment to have an even greater percentage spent on MOOSE! The CEOs and CFOs want dramatic transformation, yet the internal machine is “fed” on models which are built to rely on MOOSE and on existing choices of so-called “Architectures” which have generated the current situation in the first place. This becomes a self-fulfilling prophecy. Why expect a different result when one is applying the same methods, the same tools and the same approach.
The need to transform the approach is not just a “nice to have”….it is a matter of survival for many companies.
5 simple steps to
improvement
The approach which Cordys has heralded is to: 1)
Develop New Initiatives on a Business Process Operations Platform above the
existing technology base with maximum length of projects of 3 months. 2) Freeze
all developments on traditional platforms reducing the maintenance of existing
software to the minimum. 3) Use the
people who are the business “knowledgeable” people to actually produce the
solution….not just feed it to the IT people so that it takes 4 months to just
understand what to do. 4) Continue to innovate the
business on the same platform with 3 month “time-boxed” projects. 5) Freeze traditional applications and
outsource them as a service to BPOs who are very willing to run them with a
clear cost reduction commitment as long as no new functionality is added. 6)
Move the innovation piece to become a continuous way for the organization to
deliver ROI projects which then can have a payback period of 3 months and the
remaining part of 6 months as accretive to the business returns.
Increase
effectiveness by 500%
The outcome is a model which goes from a effectiveness ratio of New
Initiatives to MOOSE of 47% to an effectiveness ratio of 2.2 or 70% of New
Initiatives to 30% MOOSE. 500% better.
Furthermore instead of having the new initiative curve just be a one-time delivery of value, the new curve continues to build at 3 month intervals.
There is an immediate productivity gain with the continuous translation needed in traditional environments between the Business Staff and the IT staff. This can be as high as 0.5% of Revenues.
The outcome on the speed is that in the same time as an old legacy platform approach, you can actually fulfill 7 new initiatives. This is 700 % better.
Lastly one can move the average to 2.5% of revenues from 4.5% of revenues by minimizing MOOSE all together.
If the pain is real, then the “Gun at the head” that the traditionalists will place to all CEOs, CFOs and CIOs who want to innovate by using the word RISK even after having built an unsustainable model, will be gone forever.
There is a better way.
Learn more and download the full presentation about MOOSE (pdf, 1
MB)