Gartner

Newsroom

Orlando, FL, October 9, 2006 View All Press Releases

Gartner Says Eight of Ten Dollars Enterprises Spend on IT is "Dead Money"

Analysts Examine The IT Investments Powering Productivity and Growth During Gartner Symposium/ITxpo

Too many IT organizations and too much IT spending is not contributing directly to business growth, according to Gartner, Inc. In fact, eight out of ten dollars that companies spend on IT is “dead money”.

Gartner analysts explained the challenge facing IT during the opening keynote address “The New IT Investments Powering Productivity and Growth” here at the Gartner Symposium/ITxpo, which is being held October 8-13. Gartner analysts said IT leaders must be able to show the business value they bring to their organization.

“We say ‘dead money’ because, while it is keeping the lights on, it isn’t directly contributing to your business growth or enhancing your competitive advantage,” said Daryl Plummer, managing vice president and Gartner Fellow. “In today’s environment, any corporate function that doesn’t contribute to growth or competitiveness is ultimately expendable. Your placement of resources is more critical than ever to your ability to deliver the growth and competitive advantage that your CEO is expecting.”

At least two-thirds of all IT spending is just to sustain the business, not to change or transform the business. The investments allocated to do new things, to change the business, are usually low, no more than 20 percent, and the investment in innovations which could transform the business is even less.

The challenge for IT leaders is to get their budget from 80 percent “keeping the lights on” to 60 percent or less, so they can use that money in new ways to drive growth.

Making the Right Investment Decisions and Measuring Their Value
A recent Gartner EXP survey showed that half of CIOs said business doesn’t know what it wants or business professionals don’t collaborate with IT organizations.

“It’s imperative that IT leaders take the initiative to start spending their IT money differently,” said Audrey Apfel, vice president at Gartner. “IT leaders need to think differently about how to make the right investment decisions and to measure their value.”

Gartner analysts identified three ways IT leaders can spend their IT dollars differently.

 

  • Intelligent Reinvestment – When IT leaders save real money, immediately tag it for future investment in a particular area or against a particular strategic business goal. Don’t just cut costs.
  • Seize the Day – In some very key business initiatives, IT can and should lead. For some of these top initiatives, IT organizations have the skills in these areas, so they shouldn’t wait for tomorrow, they should seize the day.
  • Make the Connection – Make sure value is measured, discussed and managed – not in discrete project packets with unsuitable metrics such as return on investment (ROI), but with an eye on linking and integrating the technological past, present and future for your enterprise.

Discipline
IT leaders must initiate disciplines that ensure the IT organization is managing its IT assets well, helping the business provide more effective oversight, and providing mechanisms for the business to use in identifying the needs for IT.

These disciplines include: leading change; governance; program and portfolio management; architecture; and risk management. Effective IT leaders have to be able to do all these disciplines.

If an IT leader’s infrastructure is inconsistent, and their architecture and project and portfolio management aren’t working, their governance will never work. They won’t be considering the right questions, let alone making the right decisions. If these leaders can’t manage change, they can’t make the business investments pay off, because even if the technology works, the business won’t use it. Lastly, if a company can’t manage risk, they open themselves to catastrophe.

“If you can’t support growth and innovation because you’re not a disciplined organization that can move fast and surely, then you become irrelevant,” said Richard Hunter, group vice president and Gartner Fellow. “Anything that doesn’t support growth is expendable. You’re either a contributor to the business, or you’re an expense to be cut.”

Be Different
The aging baby boomer generation of IT managers must plan for succession. Gartner analysts said IT leaders need to find and nurture fresh talent. That talent will be multi-skilled, multi-disciplined, and multi-fariously experienced, and it will take on new roles.

“If you want to be world-class, you need to make space for your next great IT innovator, who is more likely female, your next B2B partner is likely to be from China, and your next knowledge work strategist who is probably under 25,” said Mark Raskino vice president and Gartner Fellow. “Monocultures that say ‘we only respect engineers’ won’t attract vital aesthetic design talent into their teams. Companies who only work in strict hierarchies simply cannot understand Web 2.0 collective intelligence methods.”

This new workforce will be a totally digital generation, fully immersed in digital technology. They love and expect further possibilities, yet are unconcerned with the implications of their preferences on others. Many of these traits are already being seen in employees using consumer technologies to make them more efficient.

IT organizations need to embrace and extend consumerization. However, most IT departments are getting a bad reputation for preventing the entry of valuable consumer originating technologies. IT departments need to change this perception by being the people that spot the technologies first, smooth their entry, accelerate their spread, make them safe and secure, and exploits their benefits for the organization.

“The bottom line is that we are witnessing the start of a new phase in IT,” said Peter Sondergaard, senior vice president and global head of research at Gartner. “By 2009, organizations will be required to deliver scaled-down versions of content, applications and value-added services to selected customers’ personal, virtual or home computing environments. By 2010, a substantial shift in platform ownership will be underway. The consumer will commence owning a larger portion of your IT infrastructure.”

About Gartner Symposium/ITxpo
Gartner Symposium/ITxpo is the IT industry's largest and most strategic conference, providing business leaders with a look at the future of IT. For more than 14,000 IT professionals from the world's leading enterprises, Gartner's annual Symposium/ITxpo events are key components of their annual planning efforts. Attendees rely on Gartner Symposium/ITxpo to gain insight into how their organizations can use technology to address business challenges and improve operational efficiency.

In Orlando, an integral part of the Gartner Symposium is the ITxpo showfloor, where more than 150 technology companies are showcasing the latest technology solutions. There are nine ITxpo marketplaces, including business applications and BPM, business intelligence and data warehousing, outsourcing and IT services and security. ITxpo marketplaces are focused areas designed to aggregate solution providers into a specific market and link conference topics to market solutions. Attendees can attend technology company presentations and schedule face to face meetings with exhibitors of their choice. Additional information is available at www.gartner.com/symposium/us.

 

Contacts
About Gartner

Gartner, Inc. (NYSE: IT) is the world's leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is a valuable partner in more than 14,000 distinct organizations. Through the resources of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, USA, and has 6,100 associates, including more than 1,460 research analysts and consultants, and clients in 85 countries. For more information, visit www.gartner.com.

Comments or opinions expressed on this blog are those of the individual contributors only, and do not necessarily represent the views of Gartner, Inc. or its management. Readers may copy and redistribute blog postings on other blogs, or otherwise for private, non-commercial or journalistic purposes. This content may not be used for any other purposes in any other formats or media. The content on this blog is provided on an "as-is" basis. Gartner shall not be liable for any damages whatsoever arising out of the content or use of this blog.

Gartner Insight
Gartner Webinars