Ch 5: Too Much of a Good Thing

My first thoughts were haven’t I already read this chapter? It seems very repetitive of content in the former chapters by declaring that companies will practice more conservative spending because of overbuying in the 1990’s. One new point that caught my attention was maintenance costs. It was uncommon for buyers who initially purchased software at a 50% discount to then incur maintenance costs of 40% or more every year after on the software’s current list price. How had companies not predicted these hidden costs? I guess they used the same lack of attention with negotiating contracts that they had with purchasing new technologies. Hopefully in the future, these contracts will be re-examined and negotiated for savings before signing checks for maintenance with little thought.
The steps mentioned that companies should take in downsizing were wise. In order to inventory assets, manual inventory counts that include IT and business unit members combined with the tools such as those offered by BDNA for discovering hidden and underutilized assets will work. Next, writing off waste could be a painful experience for people not wanting the blame but not nearly as painful as paying for technologies being used. Redundant capabilities including hardware, software, networks, etc. must be eliminated. One idea not mentioned was centrally locating resources. Motorola was mentioned in this chapter as having several different types of Oracle sitting on different hardware platforms at scattered data centers, which is a very inefficient use of resources. With centrally located resources, equipment, applications, facilities, staff, and other resources are together. Rather, instead of downsizing to get more out of the IT buck, relocating to get more through efficiencies and economies of scale. Perhaps, companies should downsize first, and when they cannot downsize any further, centrally locate resources.
In conclusion, I agree with principles discussed in this chapter. IT spending will decrease as companies as technology bills and budgets are being scrutinized. I think this assumption is definitely apparent today because of the recent turmoil in credit markets and continued uncertainty about the future economy. Uncertainty of the future causes concern for consumers who spend less in general. This is likely to spill over into business and IT spending. In the business conditions class that I am currently taking, we read a an article by the research group Gartner that advised CIO’s to create two separate budgets; One regular budget and a back-up one that assumes the need to cut IT spending in response to the arrival of a business slowdown. The potential of a business slowdown combined with harmful spending in the 1990’s will likely cause the growth of IT investments to slow.