Biting the Bullet on IT Investment

By Eric Chabrow  |  Posted 02-07-2008 Print Email

An argument for spending up front when replacing legacy systems.

Far too often, companies keep legacies systems well beyond their practical usefulness, says Accenture CIO Frank Modruson, who contends many IT executives fail to focus on the long-term benefits of investing in new IT as they tweak existing systems. In an interview with CIO Insight editor Eric Chabrow, Modruson discusses how Accenture reduces overall costs by investing more up front and the benefits of having all its applications Web-ready. Here's an edited transcript of that conversation.

CIO Insight: Accenture research suggests that companies aren't aggressively investing in IT. How so?

Modruson: Companies spend more time running and operating their existing systems than they do keeping them up to date. It's like a house; it's much more expensive per square foot to rehab a house than to build a new one. At some point--this is a very emotional thing for people--you're better off bulldozing the house and building a new one, right? I'm not recommending that we should always bulldoze systems and put up new ones, but in a lot of cases, it's less expensive to start over and put a new application in.

For example?

We had a packaged scheduling system that had some performance and information usability issues. We could have invested in improving that application. But the best answer for us was to drop the package and put in place an easier-to-use, simpler, customized Web-based application. The new application is dramatically less expensive to operate because it scales better and uses hardware better. We drove down the operating cost of the application.

It used to cost about $6 million a year to run this app. The new app costs about $3 million. It paid for itself in a year, but the counter-intuitive thing is that replacing the old app was actually a much better business case than tweaking the existing app. Most companies fall into the trap of, "Instead of spending a million bucks to replace it, I'll spend $200,000 to tweak it." Plus, the new app helped us schedule people better and faster, reducing the time to match people to engagements by 70 percent. That's actual money in our business, right?

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