Austin, Texas (PRWEB) February 11, 2009
In troubling economic times, IT organizations need to make smart savings and investment decisions to help their companies not just weather the storm, but emerge with a distinct competitive advantage. Rich Murphy, Planview Executive in Residence and former IT CFO for Deutsche Bank, has been through down cycles and based on his experiences, outlined five steps to making better IT investments in the current economic climate.
According to Murphy, IT has a direct impact on a company's growth, productivity and ability to adapt to dynamic market conditions. With the right strategies, including portfolio management, to carefully manage IT spend, companies can grow market share and come out the recession even stronger.
Step 1: RTB is the Enemy, not CTB; Attack RTB with Passion
In most businesses, costs to run the business (RTB) represent between 60 - 80 percent of the total IT cost while change the business (CTB) costs represent 20 - 40 percent, which means attacking RTB costs delivers the biggest result. With a portfolio management system like Planview Enterprise including time reporting, IT organizations can easily determine how much they are spending on RTB vs. CTB and many other key metrics that will help them determine and address how they spend their IT dollars.
Murphy suggests carefully examining three areas to reduce RTB costs, including consulting, storage, and applications and hardware in order to become more efficient. This results in better expense to revenue ratios, lowered cost to manufacture or deliver services, increased ability to handle price pressures of a competitive marketplace and liberated dollars to invest in CTB or return to shareholders.
Step 2: Growth is the Key to Success
Long-term survival of a company depends on growth, as employees and investors are putting more importance on a company's ability to grow. Even in tough economic times, Murphy suggests companies carefully consider any reductions in growth investments as a means to save on expenses; the result will be a vicious cycle of reducing expenses because revenue is not growing.
Step 3: Innovation Results in Competitive Advantages
While companies should invest towards growth, what happens when their entire business model or industry undergoes radical transformation via innovation? This has been referred to as 'R&D' in the pharmaceutical industry, 'exploration' in energy and products like derivatives in financial services. In today's business world, advances and productivity changes are driven by technology, and technology investment equals innovation.
Step 4: Cost Reduction is Good - Cost Elimination is GREAT
According to Murphy, organizations must stop thinking about how to perform tasks more efficiently and instead start thinking about how eliminate the task and cost by automating the work.
Automation and continuous elimination of work requires CTB investment devoted to process improvement and elimination of work task. If companies can invest money one time that results in elimination of on going cost, the ROI should be very appealing.
Step 5: Aligning CTB Spend With Business Objectives
All IT organizations should be able to answer three questions about IT CTB spend:
1. Is the spending aligned with the overall business objectives of my company or organization?
2. What is the purpose - revenue, cost, risk or legal - of the IT spend and what part of the business is sponsoring the spend?
3. Is this the best use of limited CTB spend?
Difficult economic conditions require difficult decisions and great leadership. Reducing overall IT is fairly easy, but leading organizations weigh these decisions carefully and invest in long-term success.
To download the full whitepaper from Rich Murphy, executive in residence at Planview, visit http://www.planview.com/5stepswhitepaper.
For 20 years, Planview has been advancing the discipline of portfolio management, helping our customers change the way they manage people and money to make better business decisions. With a singular focus on portfolio management, Planview is the only company that combines customer-driven software, unmatched domain expertise, and proven best practices to solve each customer's unique business problems.
Planview Enterprise®, a market-leading portfolio management application suite, with Planview PRISMS®, the knowledge base for accelerating organizational change, delivers measurable business results for IT management, product development organizations and throughout the enterprise. As an independent, trusted partner, Planview is committed to interoperability with key management systems through the Planview OpenSuite integration product line. Industry leaders such as Citi, BP, and EDF, rely on Planview to drive revenue, mitigate risk, cut costs, create efficiencies, and ultimately give their businesses a competitive advantage.
Privately held and consistently profitable, Planview is headquartered in Austin, Texas. With offices across North America, Europe, and Asia-Pacific, the company supports customers in virtually every industry around the world. For more information, visit http://www.Planview.com.