Debating IT`s True Value

One of the few bright spots in these tough times has been the market for IT services. Amidst all the gloomy headlines–the talent shortage, the economic and financial crises, layoffs and lowered forecasts from the tech industry, rising unemployment in the broader economy–IT services employment has gone up.

One byproduct of this countertrend is the light it sheds on the real value, or lack thereof, of corporate IT departments. That’s what Barry Brunsman, managing director with consulting firm Alvarez & Marsal and former vice president of IT strategy at Target, sees happening. His thesis is that the healthy IT services market amid a troubled business environment essentially puts a price on IT, and that allows IT shops to quantify their own return on investment against what’s available in the market.

“The value of IT has been the subject of debate,” Brunsman says. “In the future, it won’t be a debate. It’ll be, you’re either beating the market or not beating the market.” When the boss runs the numbers, you’ll either be able to measure your worth to the enterprise or you won’t.

Not everyone agrees with Brunsman. After we posted a blog item on this topic, several IT pros weighed in, casting votes against his theory. Some claimed that the idea has been around forever. Others said Brunsman’s idea missed the point because it focused on IT’s cost, not its true value. Some who commented made coherent points, but most failed to truly quantify the idea of value. There may be deep, detailed challenges to his analysis, but, so far, his point remains largely intact.

Brunsman is right on two fronts. First, the perceived value of IT to the larger business has been debated for years, but often has been misunderstood. Our IT Trends for 2009 survey–and past years’ surveys–sheds ample light on this.

Second, the mass availability of IT services does put a true price tag on IT, at a moment when CFOs are looking to justify every expenditure. The difference between “value” and “cost” is more than a matter of semantics, but cost is certainly a starting place for the discussion.

The most important point to Brunsman’s argument is what lies beneath: the age-old argument of whether or not IT is simply a cost center or a beneficial contributor to the overall business. Plenty of business executives view IT as a utility, or a commodity, and they can’t be blamed for that. But even if IT is viewed as a commodity, the increasingly tempting option of outsourced IT services presents an opportunity to finally put a true metric on your IT shop.

“If you’re beating it, you’re winning,” Brunsman says. “You’re delivering value to the organization that is not readily available in the marketplace. That’s a very powerful thing.”

Brunsman understands that it might sound like he’s mounting what he calls a “full-frontal assault” on IT, but he posits that it’s the opposite: “I’ve done a lot of IT assessments and I’ve never seen a case where that IT organization isn’t better than the market at something–maybe even lots of things. If you hold yourself to the standards of the marketplace and can show and demonstrate time and again that you’re a better provider than the marketplace, that translates into shareholder value.”

Whether or not you agree with Brunsman’s argument, it puts the debate over IT’s value front and center, and that’s a good thing.

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