Kiss and Make Up

This article introduces the concept of a "1 percent" IT Organization. Is this a meaningful concept?

"Industrial manufacturers often have strained relationships with their IT organizations because manufacturers demand better IT support while simultaneously targeting IT for not cutting costs. Some companies have successfully emerged from this predicament using a lean, best practice model which we call "the 1 percent IT organization." This means IT has a cost structure approaching 1 percent of revenue. An IT organization that can transform its operating model to act as both cost center and strategic enabler will be poised to manage both the cyclicality of the present and the growth needs of the future."

This could have been an excellent article that it isn't. The premise of strategic sourcing coupled with demand management creating value is undeniable. Every business leader must know this.

However, intertwined with this gem is the warped logic that IT cost as a percentage of revenues is a meaningful measure of IT value. If there ever was a misleading metric, this would be it. Otherwise, the article would have included some cute charts and graphs on the value delivered by these "1% organizations" over time. It would have included the comparison of those values with the "3-4% Organization."

And then, I would have beat the article on the head for failing to establish the connection between the value delivered or lost and IT spend as a percentage of revenues!

Strong words? Perhaps.

The issue of IT Value would be so much simpler to solve if we stayed away from muddying the waters so much. It is a problem gaining yardage. Let us not make it more difficult by losing yards to inane arguments and metrics.

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Posted on 05/20/2009 by

Kiss and Make Up author sourabhhajela



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