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The Business Value of IT

Growing businesses not only demand more IT solutions; they also require IT systems to be more intelligent and perform better. Systems that meet these criteria are considered to be scalable. Today's businesses demand IT systems that can scale up to meet future business needs. In his book Business @ the Speed of Thought (Warner Books, 2000), Bill Gates predicts that business is going to change more in the first ten years of the new century than it did in the previous fifty years. Are your IT systems sufficiently scalable to stand up to business needs that are changing at such speed?

IT scalability depends largely on the nature and size of the business. Complex businesses that interact with a wide array of value chains require highly scalable IT systems. Highly scalable systems are often expensive—at least, that's what vendors demand and customers expect. But how do you assess whether a system is really scalable? Business stakeholders may look at the hefty price tag and assume that the system is scalable. Engineers and architects may look at the interfaces, architecture, and standards, and claim that the system is scalable. But does scalable architecture and a hefty price tag determine the business value of IT scalability?

The face value of scalability is usually assessed in terms of technical integration. What business value can be derived from scalability? IT comes with a cost of ownership, which should meet the minimal sustainable cost for an enterprise. If the cost of ownership is not sustainable, or if it doesn't equate to a positive return on investment (ROI), the level of scalability of the system may not make sense for that business. If a business cannot derive value from a system, owning a scalable system doesn't make any business sense.

NOTE

"Information technology is not a stand-alone system; rather, it is a great facilitator."

Paul O'Neil, U.S. Secretary of the Treasury and former CEO of Alcoa

The perceived and derived values of IT also determine how businesses use IT to solve business problems. A noteworthy example is that of web services. In the early 2000s, many companies got carried away by the hype of web services. "Early adopters of web services are generally not getting the right balance between the near-term business impact and the long-term architectural direction," writes John Hagel, author of Out of the Box: Strategies for Achieving Profits Today and Growth Tomorrow Through Web Services (Harvard Business School Press, 2002). Many companies took the hype as a perceived benefit and implemented web services in their enterprise. Later followers studied the derived value and implemented web services in the enterprise, but with an intelligent architectural approach that made sense from the long-term architecture perspective.

Much of the IT hype, such as that associated with web services, derives from the fact that IT has revolutionized the global economy and brought great social and economical changes. Many non–IT communities believe that IT can do magic. But IT solutions are not in themselves silver bullets. They only work when the processes and people (both technical and non-technical) surrounding them work.

IT has revolutionized the way business is done. But what do the IT communities feel about their role in business transformation? There's a misconception among IT communities that business problems are rarely well-defined. Although no one doubts the usefulness of IT in adding business value to an enterprise, IT blaming marketing and marketing blaming IT for poor final outcome or quality of a system is a common problem in many organizations. Missed requirements and incongruent outcomes are common even if the system's quality is optimum.

The quality and value of business requirements fulfilled by IT depend on the nature of the business and the nature of the enterprise. Processes and bureaucracy are some common bottlenecks, especially in large enterprises. Poor requirements, as mentioned earlier, could be a bottleneck for creating an effective IT solution. In a complex business ecosystem, where constraints and bottlenecks are common, can IT solve all business problems?

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