IT Costs, Value and Role of ITIL

One of the challenges with business executives, and senior IT management for that matter, is a constant fixation on the costs of the IT function. In senior management circles “IT sure is expensive” is a constant refrain followed all to quickly with attempts to downsize, outsource, cut budgets and so on. The problem is that IT and the business are often fixated only on costs, but what about value?

The IT Infrastructure Library (ITIL) has a good chapter on IT Financial Management (ITFM) in its Service Delivery volume. To its credit, it covers budgeting, IT costing and, if applicable, how to charge back for IT services.

All of these concepts are useful and need to be considered but what about the value added by IT? What about proving there are benefits associated with the investments made by the business? Wouldn’t the world be different if IT and the business understood cause and effect and, even better, understood that judicious investments in IT can generate promised returns?

If something is viewed as a commodity then the focus will naturally be on costs. When we go and buy gas for our cars, we often use price as a deciding factor because for most of us we view gasoline as the same product from one vendor to another.

If we allow this same reasoning, even if inferred, to exist both within IT and the management level then IT becomes a commodity and the focus becomes entirely on costs. IT is not a utility. Parts of it may look like one but we must transcend costs and forevermore focus on both costs and value, not one or the other. Our objective must be to enable the firm to attain its goals and nothing less.

It was once said that, “firms do not exist to cut costs, they exist to maximize profits.” That is a profoundly true statement on many levels. If we get specific and identify that the goal of capitalist organizations is to maximize profits for shareholders then there is far more at play than cutting costs.