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The fundamentals of tech investments today

Alexander Bloch | Jan. 7, 2003
Trends in IT deployment and where your technology budget should go

Self-Funding Approaches

The cost of running the IT function is going up a lot more than the actual IT budgets CIOs are getting from the business. So, strapped for funds, CIOs need to find ways to unlock some of their self-funding capabilities within to pay for necessary IT investments. This leads to talk about the management of technology functions today. Innovation is a buzzword. Everybody talks about it. Everybody talks about the fact that innovation is going to be your main ingredient for growth, sustainability and the evolution of your industries.

Another factor to consider is how the traditional IT processes and IT strategies, are now changing. Every single CIO has had to do something like this: create full-year IT strategies. The CIO needs to get an idea of where the business is heading, what the new capabilities can address, what business opportunities new technology investments can deliver, what practices to adopt that can help him/her best manage the IT organisation, enable better corporate governance and drive organisational transformation.

The reality the CIO faces today is that he/she no longer has enough time to spend on business strategy. The IT strategy we can create today is inherently involved and has to be refreshed at least once a year. It can be put together as a five-step strategy. The technology on stream can displace our entire IT industry very quickly. The new industry trends are driving some of the changes we need to consider in our plan. So every time there is significant change it gets picked up from the outside, we need to feed it back into the business strategy in order to be relevant/current in our IT strategy. Senior information executives no longer can live on three-year IT strategy programmes. Those programmes have to be on shorter timelines, much more frequent and much more refreshing.

Disruptive Technology

That leads us to how disruptive technology has been. Here is a bit of popular wisdom: One new technology can cause great firms to fail. There are plenty of examples of this axiom. One that comes to mind is Voice over IP. Traditional telephone carriers had known about Voiceover IP for the last ten years but they failed to respond and incorporate the new capabilities that Voiceover IP had to offer. They pretended it didnt exist because their entire revenue model was based on two principles: the distance due to cost of traveling, and the duration of the call. With the evolution of the Internet, distance no longer mattered, and the duration didnt matter because once you had broadband service, you paid one price regardless of how much data you transferred. With that the entire revenue model of traditional carriers can be obliterated in a matter of days. That is how quickly things can take a business out of its well-established markets. An entire business model can be challenged by simple technology.

 

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