Study examines IT investing for high performance

BANGALORE: The quest to contain spending on information technology frequently backfires, forcing companies and governments to increase expenditures on IT maintenance, repairs and other unproductive practices, said a study Accenture released today.

The study, “IT Investing for High Performance”, determined that the universal goal of using IT to achieve more with less remains elusive, as survey respondents cited inability to close the gap between goals and results, despite average IT spending increases of 9 percent last year.

This paradox stems from what Accenture termed as “austerity trap.” The trap lures companies and governments into believing that they can freeze — or even cut — IT budgets while maintaining the same level of service.

The trap forces behaviors such as retaining outmoded legacy systems instead of deploying new technologies, leading to higher costs in the long-term. What's more, many companies launch labor-cutting initiatives that also contribute to lost productivity, while failing to achieve the intended savings. Accenture said in a press statement.

A rise in costly government-mandated compliance requirements and for some companies, increased expenses associated with the post-merger integration of IT systems has combined with the austerity trap to form a “perfect storm” that is diverting IT budgets, often leaving an inadequate amount of capital for investing in controllable earnings growth and productivity.

“Our study indicates that there is a significant difference in the level of investing versus maintaining between high and low-performing IT organizations,” said Bob Suh, Accenture's chief technology strategist and the executive who headed up the study. “Poor spending quality is characterized by a high percent of time spent on maintaining and fixing systems versus investing in productivity-driving change.”

The study also challenged the perception that the services industry is more nimble and productive than the older manufacturing sector. Razor thin margins and increasing labor costs, combined with vulnerability to global competition, have forced manufacturers to better harness IT to lift productivity. In the absence of similar pressures, the services industry, despite its dramatic global growth, has lagged manufacturing in productivity growth, automation, strategic sourcing and metrics.

An analysis of study findings determined that this “productivity gap” could be closed if the services sector and internal IT functions “industrialized” by adopting practices used in manufacturing, including performance-based metrics, cooperative global sourcing, and investment in plant automation.