Mastering IT Economics

Michael Vizard

The roughly $4.5 trillion that will be spent worldwide this year by companies on IT typically breaks down to about 3.5 percent of the revenue generated by the average company, or about 4.3 percent of an average company's operating expenses.

 

Given those numbers, Howard Rubin, president and CEO of the IT consulting firm Rubin Worldwide, says that companies that master IT economics versus those that fall victim to it create a sustainable competitive advantage over their rivals. What most business executives fail to appreciate, says Rubin, is that companies with revenues of $1 billion or more have as much as 30 percent less IT costs as a percentage of revenue, which Rubin says can be attributed largely to their having a mainframe-centric IT culture.


Speaking at a recent stop on the zEnterprise World Tour in New York, Rubin says that while the cost of acquiring mainframe technology is comparatively high to distributed computing systems, the total cost of operating those environments is substantially less. Therefore, Rubin says that companies with a mainframe-centric approach to IT are inherently more competitive than companies that rely primarily on distributed computing systems. The challenge, says Rubin, is that in order to attain those savings most companies have to get to a significant amount of revenue, by which time they have already become dependent on distributed computing systems.


IBM, of course, is trying to make mainframe technology more affordable with the recent introduction of the z114 system, a member of the zEnterprise mainframe series that IBM launched as part of an effort to converge mainframe and distributed computing models.


Rubin says that the real trouble with enterprise IT is that no one really takes the time to identify patterns in how they acquire and then use various elements of IT. But as IT becomes a more critical element of the cost of delivering goods and services, Rubin says that the business leaders of tomorrow will be defined by their ability to grasp the true economics of IT today.



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