IT Investment - Considering the Full Picture

Most IT organizations look at their budgets as a vital figure. Emphasis on cutting the budget, limiting the growth of the budget, coming in under budget and getting the most out of the IT budget are sensible and natural ways to view IT operations. Direct spending for IT hardware, software services and staff, however is only a portion of the investment an organization expends on IT and focusing too much on this view does not provide a full investment picture.

ITCentrix views several other components in addition to IT budget to identify the true IT investment and risk factors that should be considered in managing IT assets. These include:

• User time spent actively using the applications
• Lost business value from unplanned outages
• The opportunity cost of applications maintenance staff
• Exposure to a disaster (not shown in the pie)

Consider the following example. An organization has an IT budget of $20M. It has 2,000 users who, on average, spend approximately 25% of their time actively using the applications supported by the IT department. The users are paid about $50,000 per year on a fully loaded basis. Hence, the application's users represent an investment of $25M per year by the company (2,000 users X 25% X $50,000). Stated another way, the company is spending $25M per year on funding staff users who do nothing, all day, every day except actively use the IT applications in question (even though those full time users are "virtual" (e.g. 25% of four people's time = 1 FTE).

Downtime Impacts

From an IT perspective, the company has reasonable availability but suffers moderate outages that last between 30 minutes to 2 hours typically. The users have a slightly different view of application availability that sometimes differs from that of the IT folks. Regardless, unplanned application outages definitely have an impact on productivity, as during an unplanned outage, the users of the applications, particularly the critical apps, tend to do other tasks that are less productive than when using the IT applications in question.

The Cost of "Friction"

Additionally, the company maintains a staff of 10 full time development professionals that are paid $100,000 per year on average (fully loaded). A portion of this development staff is dedicated to doing nothing but maintain the IT applications. These developers are not adding new function; rather they are maintaining the existing applications to allow the company to remain competitive.

Exposure to a Catastrophic Outage