Our previous discussion of the CIO provides some sense of the role leaders have to play in the IT area. This chapter raises some additional issues as we look at the scope of IT management. Three issues are singled out for particular attention:
Incremental Outsourcing –
We have talked in the past about the age-old business question of whether it is best to build it or buy it. “It” can be a portion of a product you sell, the building you operate from, or IT services. The new information covered in the first portion of this chapter is that there are emerging services that offer more opportunities to buy rather than build. Web hosting is the example used through this section (the iPremier case gives you an extended reference to consider), and the opportunities managers now have are examined. The central point from an IT perspective is that while we have considered major outsourcing (think XEROX), there are small-scale opportunities that present less risk to the company. The financials are explained well on page 455 and should give everyone reason to think seriously of these options.
I suggest you read pages 469 to 472 at least two times. Older computer systems didn’t all disappear on January 1, 2000. These legacy systems will be part of our businesses for another decade or so. These few pages do a very nice job of explaining the range of problems they create. You already know some of the problems. These pages will help you understand additional problems that may have escaped your notice. These problems are real and affect all managers, not just the folks in IT who have to deal with them every day.
Managing Assets –
How do you measure IT performance? How can you control costs? For many people, IT is seen as a black hole. There is always the need for more money, yet analysis of returns on that investment can be sketchy. This section of the chapter provides just an introduction to the concept of “total cost of ownership.” You are probably seeing this technique being applied in other areas of your company. From a managerial accounting perspective, it just seems natural that we would at least want to know what services like IT are really costing the company. We will have some additional discussions of costs in the Postgirot case later in the course. But for now it might be helpful to ask around and see what kind of cost analysis is being done at your company. How do you know if your IT department is efficient?
Questions for the topic: