One of the primary reasons companies don't invest more in IT is the simple fact that many of them don’t see enough of a material return on that investment (ROI). Due to a range of socio-economic issues outlined by a report from the U.S. Council of Competitiveness, not only has the economic recovery since the Great Recession been slow, actual productivity has been declining for the best part of a decade regardless of investments in IT.
Most IT budgets are a single-digit percentage of the overall revenues an organization generates, usually in the two to three percent range. Assuming most companies turn 10 percent of their revenues into actual profit after taxes, that would suggest that at least 85 percent of the revenues an organization generates gets allocated to fund things other than IT. Obviously, changing the distribution of that allocation is going to require convincing business leaders that additional investments in IT will fundamentally improve the productivity of their organizations.
Moving beyond productivity improvements
Of course, much of the buzz surrounding digital business initiatives is about just that. But for every business leader willing to fund a digital business project there are dozens more that are not even sure where to get started. Many of them are skeptical that additional investments in IT are going to make much of a strategic difference at all.
Much of that doubt stems from the nature of legacy applications. Large-scale investments in enterprise resource planning (ERP) have not resulted in significant gains in market share for any organization. While these investments make the organization more efficient, just about every organization winds up implementing a similar set of ERP processes. Investments in ERP applications are no longer competitive differentiators. They have simply become another cost of doing business.
The situation on the desktop is not much better. Employees have been using variants of the same productivity applications for decades. Unfortunately, most of those productivity applications were designed to be used by individuals. There’s a real hunger for more team-oriented tools as evidenced by the rise of Slack. In fact, now every IT vendor from Microsoft to Cisco is trying to make a case for a rival commercial offering. What makes these tools appealing to end users and business leaders alike is they address a fundamental productivity issue. Better collaboration applications, however, only address the tip of the productivity iceberg.
Making businesses more competitive
IT service providers need to reassess how the services they offer specifically address the productivity issues every business leader faces. Delivering a service that is more efficient than what an organization can do on its own is not going to fundamentally move the IT budget needle. To make a dramatic difference, IT service providers need to address how individuals inside any organization can become more competitive thanks to additional investments in IT. Only then is the percentage of the overall corporate budget allocated to IT going to increase. In most cases, that means the IT service provider needs to get significantly closer to their customers than most of them are today. That requires going well beyond being an outsourced IT department. It requires IT service providers to become strategic business partners instead of merely functioning as a trusted advisor
There’s plenty of examples where IT is being used to transform how a business operates. IT service providers need to turn those examples into repeatable solutions that can be delivered across multiple customers. How each IT service provider goes about achieving that goal will naturally differ. But the one thing that all those that successfully make this transition will have in common is a much deeper appreciation of how IT makes an organization not just more efficient, but also fundamentally more competitive.