The IT Innovation Paradox

Michael Vizard

When you think about what the business wants from IT in 2010, the word "miracle" comes to mind pretty quickly. It wants IT to contain costs, while at the same time fueling innovation. What that essentially means is that it wants the IT department to dramatically cut costs so that money can be reapplied to fund innovations.

For the past year or more, IT departments have been using virtualization to dramatically cut the hardware budget. But to create the budget headroom that IT really needs, the way enterprise software is built and managed needs to be addressed. Right now, IBM estimates that the total value of enterprise software already deployed is about $4.5 trillion and most of it is poorly managed. The compounded value of that software is growing at a rate of about 8 percent a year, adds IBM.

That software adds a lot of value to the business, but about 70 percent of the IT budget goes into maintaining it. When you add up all the other elements of the IT budget, that leaves about 5 percent or less for funding anything new.

Scott Hebner, IBM vice president of marketing and strategy for Rational products within the IBM Software Group, says these are among the reasons IBM is campaigning for organizations to re-evaluate how enterprise IT works. He says there are huge haps between the development team and operations team in IT that result in applications having to be constantly reworked, which adds unnecessary expense. IBM wants application development teams to work closely with operations people so that applications are ready to run when launched, versus having to be rolled back multiple times because of a general lack of communication across the various disciplines that make up the IT department.

To accomplish that goal, Hebner says IT organizations need asset-management tools that provide a federated view of all software and hardware assets. It's only when they really understand not only what they have, but also what it does, that IT organizations can really address cutting software costs.

Outside of some broad strokes around rationalizing and consolidating applications, software costs have been the one area that most IT organizations have not been able to bring down. After cutting everywhere else, however, there's nowhere else to cut to really free up dollars to fuel other projects. In the business world, there's an old maxim that says you can eat what you can kill. In the IT world, the corollary is that you can fund what you can cut.

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