Accenture warns about risks of IT false economies

The quest to contain corporate spending on information technology frequently backfires as companies make false economies that only increase maintenance and repair costs, according to a report on Monday from Accenture.

The global consultancy and technology services provider said many companies and governments were falling into an “austerity trap” in which they believed they could freeze, or even cut, IT budgets while maintaining the same level of service.

Since the end of the dotcom boom, pressure has grown on chief information officers (CIOs) to “do more with less” as companies have sought to rein in their IT spending.

In many cases boards have clamped down on IT spending because of dissatisfaction about the results, as investments failed to deliver on their promise.

The Accenture study, based on a survey of CIOs from 300 big companies and organisations worldwide, suggests there is a wide difference in how CIOs and their companies have fared in this changed environment.

It highlights significant differences between what Accenture calls high, average and low-performing IT organisations, based on 33 proprietary indicators for managing IT.

High-performing organisations spent significantly less time maintaining and fixing systems, and significantly more time building new systems.

In contrast, said Accenture, average and low performers fell into an austerity trap in which underinvesting to reduce costs in the short term increases the percentage of time required to maintain and fix “legacy” or older, existing systems in the long term.

This was because older systems cost more to maintain and require more effort to integrate with newer systems.

“Poor spending quality is characterised by a high percent of time spent on maintaining and fixing systems versus investing in productivity-driving change,” said Bob Suh, Accenture's chief technology strategist, who headed the study.

The study found that the average IT organisation spends about 12 per cent of its time fixing preventable problems. High performers spend only 5 per cent of their time on these tasks, while low performers devoted 16 per cent.

“More than half of government respondents told us they're spending too much on fixing their existing applications, and too little time on building new ones,” said Marty Cole, groupchief executive at Accenture's government operating group.

“They want to do more. But they're being given about 30 per cent more work with only about 5 to 10 per cent more budget. Consequently, innovation is being curbed and productivity is being undermined.”