Should Information Technology be considered part of your company's growth strategy?

Twenty years ago, information technology --- computers, software, networks, people --- was usually considered a back office function. IT was simply a necessary expense, like the janitor, the air conditioning, or the plumber. The CIO was a technology expert who knew computers and systems, and reported to the CFO, who really ran the show.

Things have changed a lot since then. The Internet, smart phones, cybercrime, email, text messaging, social networking, and dozens of other innovations have occurred. Cloud computing is finally starting to become a reality, and data stored thousands of miles away on hundreds of distributed servers is now accessible within seconds. The role of the CIO has changed, and so has the role of information technology. Today, at most successful organizations, the CIO is at the same level as the CFO. Information technology is not considered just an expense; rather it is a strategic investment in the company's future growth.

A quote in a 2003 article in the Harvard Business School's Working Knowledge series sums it up nicely: "Companies that manage their IT investments most successfully generate returns that are as much as 40% higher than those of their competitors".

Although I do not have any hard facts, I think returns can actually be much higher. In a previous life I was CIO at a leading commercial real estate brokerage firm for just under 5 years. I reported to the CFO, and IT was considered an expense with no strategic value. One of our competitors clearly viewed IT as a strategic driver. Over 20 years our firm grew to $70 million, whereas our competitor (which started almost the same time as our firm) exceeded $100 million. Of course there were other factors involved, but the differing attitudes toward IT was probably a factor in the two companies' growth trajectories.

Here are a few tips for getting the most out of your IT investments:

1. Look at the big picture, not just the individual parts. Many companies pat themselves on the back because they are spending huge amounts on equipment. But equipment alone doesn't solve business problems. It's how you use the equipment that really matters.
2.  Look at your competitors, and monitor industry trends on IT spending. Are you spending less, or more than your competitors? Are you getting real value out of your IT spending? Review your IT budget, and determine what is giving the most value and what isn't. Think of IT as an investment portfolio, and rebalance it on a regular basis.
3. Outsource carefully. Monitor consultant expenses, but don't focus on price alone. Good technical people cost more than handyman types. A really good technical firm might cost as much as 50% more than a marginal one, but the quality of their work could be 10 times better. You will notice the difference over time.
4.  Make sure someone on your management team is on top of all technical decisions and watching them from the business standpoint. Your business should drive IT decisions, not the other way around.
5. Take time to make good decisions. I see far too many executives who just throw their hands up in the air, say "this is too complicated", and make critical IT decisions based on incomplete or inaccurate information.
   
6. Don't make the common mistake of rejecting IT software, hardware, or services based on the initial price. The main costs usually come down the road, in the form of bug fixes, extra service calls, hardware breakdowns, maintenance costs, incompatibility issues, endless customizations, etc. Think long term. Your company's bottom line will appreciate it.