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CostEffective IT: Service Oriented
Cost-Effective
IT: Service Oriented,
by
Richard Sonnier
Houston
Business Show "Advisor" Richard Sonnier, of the Information
Technology Services firm Nimble Services, Inc., provides weekly
information on our show about business technology issues. He can be
reached at 281-445-4800 x250 or rsonnier@nimbleservices.com.
This week I will discuss service oriented IT.
IT Service
Since Information Technology (IT) is hardware and software, it is easy
to forget that it is all just junk without service. For the proper
perspective consider the telephone. The telephone is the original IT.
However, the actual telephone handset is useless without the service.
Computers are much the same. At a low level, computers and software are
like calculators and completely functional without any additional
service. However, at the level of a business process like accounting,
service becomes an integral component of the business solution. For
example, Intuit's QuickBooks requires monthly or weekly updates to keep
up with tax law and other government changes. Much of QuickBooks' value
is this service.
IT Profit Center
In the 80's business leaders and business school professors realized
the service nature of IT in large corporations. One famous article in
the Harvard Business Review recommended organizing the IT function
within the company as a profit center. By managing the profit and loss
of IT the business focuses on the essential services that IT is
providing to the company and the value of those services. Over the last
twenty years, many large corporations have created IT business units or
companies to deliver IT services. Usually, these IT organizations serve
only the parent company, and they define a set of services to be
purchased by the rest of the company. This service orientation has
tremendous benefits like value pricing, cost savings, and outsourcing.
Value Pricing
Like any profit seeking business, an IT service organization focuses on
the needs of its customers and develops services to meet those needs.
It changes the thinking away from particular products and vendors to
what the company needs from IT to make money. The IT services are
priced in terms of their value to the internal customer. For example, a
basic PC desktop with standard business software would be so many
dollars per month. Over time this monthly charge recovers the cost of
hardware and software and provides for steady upgrades as appropriate
for the business.
Cost Savings
By consolidating the IT functions from across the company into a
focused organization, many redundant cost are eliminated. For example,
an IT service organization can buy software licenses in large
quantities at a discount to what individual business units or
departments could do. However, the biggest cost savings is achieved by
the focusing on the services needed and by improving the services to
the business lowering their cost.
Outsourcing
Focusing on the IT services allows a business to outsource some or all
of these services. A very good strategy is to keep the core IT services
unique to the business inside and to purchase the commodity IT services
from outside service vendors. For example, you could buy the basic PC
desktop and productivity software from an outside vendor while keeping
the programmers that write your custom business application inside.
Recommendations
Outside of large corporations most companies do not need to setup
independent IT organizations, and it would not be cost-effective to do
so. However, you can still reap the benefits discussed here by taking
the following steps:
- Write down IT services your company needs for its operations.
- Determine a monthly value for each of these services that you
would be willing to pay.
- Sort them into services that are unique and core to your business
and those that are commodity.
- Get some bids on the commodity services and consider outsourcing
them.
Next week I will
discuss planning for the New Year.
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