PracticeConsultingIT must justify spend

IT must justify spend

The post-gap year IT department must find new ways to justify its spending as concepts such as total cost of ownership and return on investment are no longer sufficient, according to analyst group Gartner.

The technology sector is still in a gap year – the time when IT investments are re-evaluated and companies focus on making the most of what they already have.

But experience of tough economic times will change the way future IT projects are evaluated according to Steve Prentice, Gartner’s European director of research.

‘The question you need to ask is: “How do you measure the return in business terms to convince stakeholders to invest in these bold initiatives in these difficult times?” You need to demonstrate to the rest of the business the value of IT investments,’ he said.

Research director Betsy Burton said it is the IT professional’s responsibility to tell the business what the real value of IT is. ‘Typically, we have used metrics such as total cost of ownership and return on investment,’ she said.

‘But the business value of IT is different. Often it is in soft changes – how am I building IT systems that support the strategy and plans of the organisation?’

IT used to be about automating processes, when concepts such as TCO and ROI were more appropriate, said Burton. But now IT is influencing factors such as customer satisfaction and how the organisation is perceived externally, which requires a new way to measure success.

‘IT makes us more competitive. It makes us more ready and able to change,’ she said.

Burton believes that further consolidation in the business software market could lead to the disappearance of several big name companies within the next couple of years.

‘By 2004, half of the vendors that were in business in 2000 will no longer be,’ she added.

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