Innovate or your application will die a slow death. Harsh words, but you’ll start seeing more and more CIOs, CTOs, and even CEOs demanding more and more from their existing systems and business applications.
Most companies rely on their business software and systems more than they rely on their employees. As companies start cutting back on costs, they will look at the IT department, and see 80% of their IT budget applied to maintenance of existing systems, with the remaining 20% on new innovations or R&D.
This is the 80/20 rule or paradigm. While this is valid, it is also a trap that many IT departments fall into. When times get tough, they start focusing more of their budgets into the maintenance role and forsake innovation. While this works well for the short term, many times it becomes the long term plan as well, causing company’s business systems to fall farther and farther behind the requirements of the business.
With the way things are in the economy, I expect to see many companies will start looking at the IT budget, but I don’t expect them to do the wholesale cutting they did during the dot-com bust. During the dot-com bust, many companies started to cut IT budgets, but quickly found that they could not do it without adversely impacting the productivity of the rest of their business.
Instead, the companies that invested in their IT departments, and specifically in new software tools and innovation, found that they could run their companies with less people and more software. While this concept only goes so far, many existing business applications severely lack the innovations in key areas due to the focus on the 80/20 paradigm.
Some of this is due to lack of planning, bean counting, and even lack of knowledge that something can or cannot be done within their business systems.
Another reason is the “I can do it better and cheaper” concept that is so prevalent in the MultiValue database market. Since the MultiValue database environment is so efficient and effective in developing applications that don’t take so much time or resources, we have a tendency to overlook all the tools that exist in the marketplace that have already solved many of the application problems and user demands.
Or we look at the tools and say to ourselves, “I can do that better and cheaper”. And we spend the 20% of our IT budget developing a tool that we could have purchased cheaper. Then, we spend a part of the 80% that should be spent on business systems maintaining tools developed in-house, when a third-party tool will always end up with more features and flexibility than we ever have time to program into the “in-house developed” tool
Take a look at the ROI of developing a tool vs. purchasing a tool — 60-200 hours of your time developing the tool is likely to cost you around $4,000-$14,000. Depending on the tools, you have already spent the license costs, plus a few years of support fees.
Now, look at the maintenance costs if you write the tool yourself — 20-500 hours a year on maintenance and add new functionality as needed. Again, ends up being around $4,000-$35,000 a year. Most yearly maintenance costs for these tools are less that this.
Using third-party tools is well worth it, and it allows you to spend more time on focusing on improving and innovating business systems instead of creating new tools.
Improving and innovating business systems is not solely a focus of fixing the bugs in the existing systems, but building the business software framework that can benefit from the new technologies that your CEO is demanding you put to use. More and more companies are looking at SaaS tools and applications to enhance the productivity of their business, as well.
SaaS business applications like SalesForce.com are becoming more and more prevalent in business applications for the same reason that third-party tools help your business. It costs less to have someone else maintain it and keep it current. Then the business can have their IT staff focus more on keeping your business running instead of the interfaces running.
Many companies don’t know, or are not told about, all the tools that exist to solve their problems. Now would be a good time to do a little research to see what tools exists that would make your job easier and cause your IT budget to be lower.
Remember, your CEO or company management is looking for ways to cut costs across the whole business, not just in the IT department. If the IT department can supply them with a tool that will save the company money, they will have no problem purchasing it.