It’s the old question that comes up every time the business climate gets tough, and operating budgets come under the spotlight. No surprise therefore that the Gartner Symposium IT xpo coming up at various locations around the world starting in mid October in Orlando has as one of its core themes cost management. The headline is ‘Cost-Cutting and new investment advice at the Industry’s flagship IT event’ and the comment is that it’s not an ‘if’ but a ‘when, where and how much’ topic.
I don’t like to disagree with these guys, but I think they are focussing on just one side of the game, the role traditional IT plays in operating internal business processes and activities at less cost. The challenge is that with increasing regulation this is a non differentiating activity where the only question is ‘how much does it cost’ as a benchmark against my competitors in the same industry. In this case then I fully support the Gartner statements and we will all be asked to ‘sweat the assets’. A long established principle of managing ‘mature’ activities where the law of diminishing returns suggests that it’s not worth investing more, but instead there should be a switch to using what you have ‘better’.
The goal therefore must be to get as much use as possible out of what you already posses, so clearly the reverse must be don’t buy anything you can’t use as much as possible. Well you could argue for buying into ‘virtualisation’ and ‘shared service centres’ and doubtless Gartner will do a super job on all of this, but it difficult not to conclude that this whole area is once again going to be the focus of a renewed wave of outsourcing to those who are professionally organised to make these non differentiated activities really ‘sweat’.
However interestingly you will find the phrase ‘sweat the assets’ defined in more than one book as ‘maximizing the profits generated by a company’s assets’, and that’s something very different. The question then becomes how an enterprise can get to use the most under utilised asset in most businesses; i.e. the expertise, knowledge and experience of the employees to contribute to maximising the profits. That’s why I headed this post with working smarter as its not too good to talk about turning your people into workers in a ‘sweat shop’!
I suspect that most people trying to ‘develop’ business opportunities and make sales, or deliver across supply chains know this challenge very well indeed, and that their definition of how to do this will still mean investing. Cadbury Schweppes for one has been able to take 35% out of the cost of re-deployment of new components and has reduced the time to deliver new capabilities – but think of this the other way round. What is the value of being able to get more competitive capabilities in place sooner? Every week that a new capability is delayed equates to an amount of lost revenue and margin. People know this is happening, they complain about being unable to do the new things that matter, but its difficult to harness this into value.
We need to address cost management and utilisation of the hardest assets to manage, i.e. people, with the tangible benefits to their cost base of providing the necessary support services for their product at industry bench mark levels, and the value to selling more to their customers that comes from best in class marks for ‘service support’.
The point I am trying to make is not to focus only on the usual factor around the cost of providing and operating the IT systems, which is arguably a mature cost optimisation case for ‘sweating the assets’, but also to look at using a different type of technology to ‘free the energies’ – sounds better when applied to people than ‘sweating the assets’ – of people and expertise. Who will lead for this? Almost certainly the business managers, so ironically I think we will see the IT professionals adopting cost cutting whilst the Business managers will increase expenditure on using technology to ‘free the energies’ of their people to maximize their potential to make profits.