Michael Gentle has over 25 years experience in IT departments,
consulting companies and software vendors in Europe, North
America and Asia-Pacific. He brings a refreshingly new angle to
an old problem—and directly challenges both IT professionals
and business executives to think differently about how to achieve
IT success. Visit his website at: www.michaelgentle.com
Monitoring costs and benefi ts
for traditional IT activities
If a stock you invested in dropped 20% overnight, you or your
stockbroker would defi nitely be aware of it the very next day,
and after an analysis of the situation, might take action to sell or
monitor closely. If however the expected benefi ts of an IT project
dropped by 20% compared to original expectations (over a period
of a few months, never mind overnight), the business sponsor
probably wouldn’t even be aware of it the next day—and probably
never, because benefi t monitoring of IT investments is rarely car-
ried out, or because the numbers are fudged to ensure that the
original expectations are “achieved,” or simply because the bad
news never reaches him.
The fact that such a situation can exist in the 21st century, with
companies routinely spending 2-10% of annual revenue and up
to 50% of capital investment on IT projects and then failing to
monitor their investment performance, is probably one of the best
indicators of a failed business model.
There are two reasons for this. The fi rst one is rooted in the free
lunch aspect of the traditional model, whereby BUs are free to
launch projects which will be funded out of a central IT budget,
with ineffectual pricing or chargebacks. This means there is no
fi nancial incentive to carry out a serious cost-benefi t analysis,
which ends up in a subjective form that tends to magnify the ben-
efi ts and reduce the costs, with the main objective being to launch
the project. Once the project is under way, the original business
case is more or less forgotten. IT then gets on with the job of de-
livery and the business