In order to reach the path of profits a company needs to master cost effective IT management. This creates a competitive advantage because this will force companies to either succeed or fail at cost effective IT management. The companies that will continue to succeed are the companies who have used prior IT investment experiences by other companies as a resource.
Another point that jumped out at me was the fact that companies attempt to keep up with the technology trend. The cut back in technological products has not affected the growth in productivity. The reduction in technological spending is just the beginning of journey to the path of profits. Some companies try to jump ahead to the path of profits without overcoming their lack of discipline, lack of trust within the company, and lack of focus.
Organizations that attempt to cut their cost are ineffective at times because the CIOs are not exactly sure about what needs to be cut. To solve this problem there are three solutions, Mild medicine, which gives a 10%-20% reduction, medium strength, is a 20%-40% reduction, and extra strength results in a cut of more than 40%.
The mild medicine considers limited offshoring, strategic souring, contract management and asset utilizations as areas to cut costs of IT. Yet, medium strength considers simple, operational cuts along with inclusive offshoring, hardware management/utilization, software management/ utilization and extended technological lifestyles. Extra strength requires companies to have strong business and technology advocates who are looking not only at the levels of technology spending but also at the business benefits.
I feel in order for a company to get on the right path they must be cautious and combine each cost cutting solution including the three Cs while having an optimal level of teamwork by everyone within the organization.
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4 comments:
After reading this chapter, the medicine required to cure exuberant spending in the 1990’s is substantial. Cutting an IT budget by more than 40% after years of enjoying ridiculous IT allowances presents a huge challenge for CIO’s! I definitely agree with your concluding sentence that cost cutting requires caution, the three c’s (capacity, capital, and cleverness), and support by everyone in the organization. However, support by everyone in the organization seems difficult to create. Cutting a department’s favorite technology or system can result in serious conflict. How can a manager cut a technology without resentment from its users? At the restaurant where I work, management decided to cut the system that provided employee discounts based on the individual employee’s sales because the system that calculated such discounts was costly. All of us who enjoyed such discounts were furious. Plus, the system encouraged us to sell more to our tables to receive such discounts. Without the system, I didn’t take the extra effort to sell more because I was being rewarded for such efforts. Therefore, management at my restaurant was considering only the cost of this technology and not at the benefits that greater sales brought to the company. If a company is going to cut out a popular technology, management must explain why the cut is needed and encourage cooperation.
I think an important issue that needs to be considered when cutting cost and getting rid of assets is the evaluation of their performance. Before the company can value their performance they need to consider how it is measured and have a comparison basis. So I agree that evaluation of the removal of technology, especially if it is user friendly, is important.
The important issue to the path of profits is not only when we should cut our spending and get rid of asserts, but it also has other path as others three path we should observe. I think the company should focus on the effective IT management by utilizing their spending on IT. I also agree that that evaluation of the removal of technology, but the company should cultivate the related staff to use the new technology.
IT management is very important and it is something that should be considered. If the IT management team monitors the use of IT, current and past investments, I feel that companies will have a more realistic view of the companies performance in relation to their IT as well as a more accurate decision of which assets need to be removed.
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