Changing IT from a Cost Centre to a Profit Centre.

1. ICT is a "force multiplier" (or 'cognitive amplifier').
It enables services and work to be performed "Better, Cheaper, Faster" (BCE).

It Amplifies the Effectiveness of staff at 3 levels:
  • individuals can perform tasks "Better, Cheaper, Faster", can need 5-25 times fewer staff.
  • co-ordination and communication tasks become 'zero-friction' improving cross-boundary efficiency and effectiveness. 
    • Reducing team & Department sizes removes delays and other barriers to productivity and efficiency.
  • Organisationally, decisions can be taken faster, with more informed sources and promulgated/implemented in real-time. Yielding much more agile and responsive products and services.

2. Savings may be real (direct staff reductions, measured in Virtual-FTE's) or avoided expenditure:
 same staff doing (much) more or with less.
This is without estimating additional revenue from providing services "Better, Cheaper, Faster" to clients and increasing marketshare and revenues.
By estimating V-FTE's, the ICT Department can demonstrate it brings value to the organisation, doesn't just draw down Big Budgets for no good reason.

3. Until the 1991 recession, Medium & Large companies always increased ICT staff because automation (of the backend) was well understood to be cost-effective. That process was mostly complete by Jan 1991.

3a. This is still true. The Productivity Commission has done the Economic Theory/Analysis and investing in ICT is still the major source of Productivity Growth.
[Telstra has a yearly ICT Productivity survey too. Not sure of URL]

4. In the current Government and Business Budget climate, dollars should be able to be saved by investing in ICT projects, not blind cost-cutting.

5. How to collect the V-FTE data?
Get every section/Department to undertake a Contingency Planning and Business Continuity survey.
"If we have an extended computer/systems outage, then:
  1. what impact will it have on your day-day work?
  2. how long can you survive without your systems?
  3. If ICT systems/services don't return within your critical service time, how many staff do you        need to provide the minimal component of your routine work?
  4. At what rate, and with what staff, would you be able to clear your backlog after an extended outage?"
Present at the next Senior Management meeting when the conservation turns to "lets pick on the CIO, he spends too much" (compared to what? is the correct retort), with the line:
Not according to my figures...

The studies from the Productivity Commission by Economists, circa 2001-4 are still the best models/analyses we have.

"ICT Use and Productivity: A Synthesis from Studies of Australian Firms"
"The effects of ICTs and complementary innovations on Australian productivity growth"
"Information Technology and Australia’s Productivity Surge"


From The Rust Report,  08 April 2011.pdf [reproduced without permission]

ICT an innovation imperative
By Sheryle Moon*

AUSTRALIA'S STRENGTH in the science sector, universities, and collaborative commercial networks bodes well for our performance in an information- based economy that rewards value-added exports and competitive services.

Current theory on the development of successful information economies points to a heavy dependence on ICT; information-based economies rely on access to organised systems of knowledge, and it is ICT that allows the identification, development and combination of relevant information in a way that creates innovation in the form of new or customised solutions in any given industry.

As innovation policies at the federal, state, and local levels have increasingly focused on building knowledge across all industries, the rise of ICTs have allowed small businesses, isolated companies and
enterprises with limited skills sets to become more and more innovative.

Perhaps because of this, the Department of Broadband, Communication, and the Digital Economy estimated that the national investment made in ICT each year is worth around 40 per cent more to users than the prices paid.

In 2006, the then Department of Communications, Information Technology, and the Arts (DCITA) asserted that ICT had emerged as the main technological driver of productivity growth in Australia, and that technological innovations had become the main drivers of long-term productivity growth.

The relationship between ICT productivity and innovation in general means that the ICT sector is central to the process of innovation across all industries; in many respects ICT can be considered the primary enabler of almost all innovation, regardless of the originating industry or final application.

So it is clear that ICT will play a pivotal role in developing strong economic performance and a culture of innovation into Australia's future. It will therefore be critical to Australia's innovation success as a whole — as well as to our productivity and international competitiveness — that ICT innovation and investment is encouraged and developed as a national priority.

Indeed, according to DCITA, the introduction of new ICT technologies alone triggers a learning process that creates significant innovation across the Australian economy. The conclusion reached is that policy makers must ensure investment in ICT- related R&D if Australia is to realise the potential productivity benefits on offer.

Nevertheless, according to the Australian Bureau of Statistics, ICT R&D accounted for only 7.3 per cent of total public R&D expenditure in 2002-03. Total business ICT R&D expenditure runs at about 36 per cent. AIIA has long held that the gap between public research and private business is a barrier to innovation and the ICT industry.

For the health of Australia's innovation system, it is one that must be addressed.

*Sheryle Moon is the outgoing CEO of the AIIA.

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