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Don’t let IT be a cost centre, says Mark Ridley

The IT department shouldn’t manage all the technology costs of a business, because that can lead to poor decision making.

That’s the opinion of Mark Ridley, CIO at recruitment website reed.co.uk, who explained that costs need to be held by the department that creates value from the expenditure.

“Where you have an organisation where the value and cost of spend don’t sit in the same place, you can make very poor business decisions,” said Ridley. “Think about a phone system, traditionally that would sit with me, because I owned the telephony of the business because it was seen as technology. But 95 per cent of call costs are the sales team. So I hold all the costs but provide none of the benefit of the call, I’m not really responsible for making the most of the investment. So I’d be signing off the phone bill, but I couldn’t tell you about the performance of the sales team on each call.

“We’re not talking about getting a per minute cost of your call rates cheaper, that’s the job of procurement. What we’re talking about is understanding whether the sales team is using those minutes as effectively as they could, which is about sales team coaching and performance management, not IT. So the costs of the technology need to sit with the people making use of it.”

Ridley explained that this understanding led to his organisation pushing technology costs into the teams using the services, adding that those teams were asked to make business case decisions about what technology they should invest in in order to do their jobs correctly.

He also discussed why in his opinion the trend of technology costs sitting with the IT department was initially attractive to businesses.

“It’s all too easy for a board if investment is split with costs on one side and value on the other, and the IT department is just a cost centre for the business. Then when you get to a time of economic downturn, the CEO, MD and finance director just ask every department to cut costs by 20 per cent, at which point you as the CIO end up looking to cut costs without understanding the business value.

“That makes it very hard to make sensible business-led decisions. So the decision that we’ve made is that IT will no longer be a cost centre, costs are assigned to the department making use of the technology.”

One issue with this approach is that departmental heads don’t necessarily understand how to select the best technology, or especially the best implementation of that technology for their business. Ridley explained that IT still gets involved to help with issues like governance, integration and reporting.

“We put some new technology into the finance department three years ago, and that procurement was led by the finance team but assisted by people with a technology background, to help understand what we do with governance, integration, reporting. But focusing on the value to the end user was led by the department selecting the technology. For us that made it much easier to keep the value and the cost closer together,” he said.

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