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What are the New Economics of IT?

  • Posted on August 18, 2016

New Economics of IT

The world of business IT is constantly changing. At one end, technological innovation continues to redefine the workplace, enabling employees to work in new ways. On the other, regulation continues to be evolutionary, modernising in the shadow of disruptive change.

As a consequence, IT departments are finding themselves being pulled in opposing directions.

Many companies are pursuing digital transformation projects to stay competitive. Boards are demanding more digitalisation across all aspects of businesses, yet budgets are simultaneously being squeezed. IT spend remains largely dedicated to maintaining legacy systems and adhering to regulatory requirements, resulting in limited resource for investment in exploratory IT. Furthermore, although IT department budgets are rising, the 2% increase this year does not meet this need for greater investment.

For IT leaders to tackle these twin pressures, a new approach is required. It must create space for change, balancing existing systems with new solutions, and the predictable with the explorative.

By innovating whilst maintaining, IT leaders can have the breathing space to achieve their strategic aims and introduce a new IT vision which puts innovation, digital empowerment and tech-led revenue gains at the heart of the business. We call this vision the New Economics of IT.

Changing Faces

In order for CIOs to establish themselves as strategic players, they and their department must be seen as creators of value rather than costs to the business. By being linked to driving board agenda items such as ‘digitizing the customer interaction,’ they will cease to be regarded as the ‘head techie’ and become Chief of Information. These misconceptions can be obstructive when IT leaders are trying to deliver transformational change. Digitalisation is happening across businesses in all sectors and IT leaders have a key role to play in this – which the rest of the business needs to acknowledge. As such, presenting a new vision of IT is crucial.

Here and Now

The first step under The New Economics of IT theory deals with creating a strong base for change. Businesses must ensure their core IT systems are optimised in a way that allows for peak employee productivity. As explored in our Reality Exchange debates, businesses that don’t exploit the commoditisation of IT are missing out on cost savings and efficiency benefits. Outsourcing certain IT functions as well migrating to the cloud can help create a leaner business core and free up resource for investment in innovation.

Optimising IT systems can also create room for customisation and integration in line with a business’ own unique set of challenges. Customisation naturally lends itself to innovation, as unique problems give way to new solutions. Here, technology has a direct role to play in creating business value, which can change the mind-set of misinformed fellow executives.

Embracing the Future of IT

According to The New Economics of IT, new technology must be introduced in tandem with the maintenance of existing systems. With investment in smart technology, process-driven human tasks can become automated. Migration should be gradual but the result is an improved future workplace where skillsets are drastically different to today.

Both approaches that are key to enabling digital transformation embody the ethos of the New Economics of IT. Optimising core IT systems brings the dual benefit of increased efficiency and gives room for innovation. Exploring the use of new technology allows for a new ways of working while achieving market differentiation.

Businesses must ensure they have solid grounding in order to guarantee future innovation. Thus, adopting the New Economics of IT as a philosophy now can ensure businesses have the agility, efficiency and freedom to innovate well into the future.

Find out more about IT as a commodity and smart tech in our Reality Exchange debates. Or learn more about the New Economics of IT in our white paper.

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