Think Tank: The high cost of IT complexity

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CIOs know intuitively that too much customization and a hodgepodge of IT products will boost costs. Yet when business managers have argued that their particular group has "unique" needs requiring yet another custom system, CIOs haven't had a strong counterargument in favor of standardization.

But a study of 250 companies by benchmarking firm The Hackett Group in Atlanta may provide the ammunition CIOs need to defeat the customization argument, says David Hebert, IT practice leader at Hackett. The study found that companies that fail to reduce the complexity of IT spend 30% more on finance operations and 18% more on human resources functions, per employee, than companies that have successfully battled the complexity monster.

Why? Overhead costs are much higher at companies that have more than 10 finance applications or lack a global standard for HR apps, Hackett found. IT costs go up because there are more hardware and software vendors to deal with, more customer and supplier databases to manage and integrate—and more incompatible data.

But IT organizations that keep a lid on complexity spend 15% less than their peers and operate with 36% fewer staffers while bringing in projects on time and under budget 25% more often, Hackett found. With data like this, Hebert says, CIOs will be able to educate business managers so they can make informed decisions about whether there's really a strong business case for deviating from the corporate standard.

— Mitch Betts

Best Bits

The most useful parts of recent business and IT management books

The Book: Offshoring Information Technology: Sourcing and Outsourcing to a Global Workforce, by Erran Carmel and Paul Tjia (Cambridge University Press, 2005).

It looks and feels like a stodgy college textbook, but there are some fascinating insights here for IT executives who can get over that hump. The superb content isn't surprising once you realize that co-author Erran Carmel, an associate professor at American University in Washington, was a leading expert on globally dispersed software teams long before CNN's Lou Dobbs ever heard of offshore outsourcing.

Refreshingly, the authors don't take a political stance. "Whether one is for it or afraid of it, we are convinced that managing offshoring is a competency that tomorrow's IT managers must learn. We wrote this book to help build that competence," the authors begin in typically no-nonsense fashion.

As you'd expect, the book has country sketches and thoroughly covers subjects such as managing contractors, risks and legal issues. But for me, the richest sections deal with "soft" topics like cross-cultural issues and overcoming the problems of distance, time zones and language.