By Matt Healey
Using IT to improve efficiency is increasingly important. While automating transactions to drive productivity of the average employee has been the focus of software companies for decades, in the coming year it will become even more important as wage pressure is expected to return—at least in the U.S.
The U.S. economy has grown over the past few years, but wage pressure has not yet returned due to the slack in the labor market. In 2014, the U.S. Gross Domestic Product (GDP) increased by 3.6 percent, the unemployment rate in the U.S. declined 1.1 percent to 5.6 percent; real average hourly earnings increased only one percent; and productivity for the non-farm business sector increased by only 0.7 percent. In 2005, U.S. GDP increased by 6.5 percent; the unemployment rate declined from 0.5 to 4.9 percent; earnings increased by 3.1 percent; and productivity increased by 2.9 percent.
Simply translated, this data shows that growth in the U.S. economy over the past several years has been driven by hiring the unemployed at a relatively low cost. Now that the unemployment rate is in the mid-five percent range, the ability of companies to meet increasing demand through the addition of employees is coming to an end and there is a growing need for companies to make current employees more productive. The easiest way to accomplish this is through technology investments.
Improving IT Efficiency
Traditionally, technology investments are generally focused on making line of business (LOB) operations more efficient. For example, improving customer relationship management systems so that the sales and marketing departments operate more efficiently. However, it is important that IT and software companies not only focus on improving the efficiency of the LOB, but that they also investigate how to utilize the same types of tools in order to improve the operations of the internal IT department. The coming return of wage pressure is not going to be limited to LOBs, it is likely to also affect IT departments. Using technology to make the IT department more efficient will also be important.
Fortunately, a suite of new tools was recently developed and can be used to improve IT operations. One of these is big data and analytics. It is easy to look at analytics mainly as a business-focused tool. Using the data gained through Internet of Things or social media as a way of driving additional sales through targeted marketing programs is the most common and widely understood use for big data.
However, the use of big data and analytics is not limited to the LOB, the same can be leveraged by IT to increase efficiency. By applying analytics to the IT department the same way they have applied to areas like manufacturing processes, supply chain management, and accounting and finance, IT departments can get a better understanding of the true cost of providing services to the LOB. Further, the information can provide IT departments with opportunities to streamline operations.
While the ability to optimize the internal IT department has been available for several years, traditionally, IT has not been on the forefront of driving this type of efficiency.
One reason for this is a lack of focus in IT. While most companies talk about giving the IT department a seat at the table for strategic business decisions, in reality this is typically not the case. IT is not part of the broader business conversations and is often left to react to the decisions of the LOBs.
By bringing IT into the strategic decision making process, companies can identify what the business strategy is, and what major initiatives IT will need to undertake to support that strategy. This would allow IT to use analysis tools to streamline operations in support of those investments, and deprioritize requests that fall outside of these strategic goals.
Achieving the benefits of this streamlining requires discipline, both within the IT department and throughout the executive management. From within the IT department, the IT management must manage staff, remaining focused on the major initiatives.
Automated processes that improve productivity are increasingly important to achieving this goal, but it must be managed.
As a former engineer, I understand that if left to our devices, engineers tend to continue to add features and functionality that may be interesting, but might not necessarily support or add value to the goal. This is further complicated by the LOB asking IT for a variety of quick, one-off projects that optimize some internal process. In many cases, IT will bend and provide the functionality, even if it is not in support of a major initiative. This type of ad hoc development leads to an unfocused and inefficient IT department.
To address the coming wage pressure that will make increasing headcount in IT and throughout the enterprise more expensive, IT will need to become more efficient. This happens with the same tools that IT uses to make other LOBs more streamlined, but also requires the political discipline to focus the IT department on a few major investment areas rather than responding to every request from the LOB. SW
Matt Healey is the director of services research at Neuralytix. In his role, Healey focuses on IT services and software. Prior to joining the Neuralytix team, he worked as a principal analyst at Technology Business Research.
Jul2015, Software Magazine