No Free LunchBy Frank B. Modruson | Posted 2012-02-27 Email Print
A decade-long effort to create a world-class IT organization became an accidental test of the tweak-versus- trash technology debate.
No Free Lunch
Just as my brand-new furnace took a bite out of my wallet, none of the changes we made in Accenture’s IT came free. We invested heavily, with some investments aimed at reduc-ing costs and others at adding new capabilities.
When we started, we did not consciously set a policy of replacing everything, but we did not want to be encumbered by old technology because we knew that conflicts between systems impose massive burdens on performance. Looking back over 10 years of work, we discovered that we consistently chose to jettison the old in favor of the new, and when we were done, we had changed absolutely everything.
Each of the changes we made took time and entailed more than a little disruption. For example, we moved to our global SAP platform in a single big-bang implementation. The downside risks were obvious, but so was the upside potential: We got to a single version of the “truth” across our entire global enterprise much faster with this approach.
Our internal customers are pleased: The percentage of “satisfied sponsors”—the senior executives with whom we work very closely on each of our IT initiatives—rose from 67 to 92 percent between 2001 and 2010.
Clear lessons emerged from our accidental experiment. Roughly one billion dollars in cumulative investments resulted in three billion dollars in savings. Thus, for every dollar Accenture made in IT investments over these years, we realized three dollars in savings—a very impressive return.
Our IT operation became dramatically more efficient over the period: IT spend in total dropped 22 percent, and the IT expense as a percentage of Accenture’s net revenue fell by 59 percent. IT expense per employee dropped by 70 percent, even though we made massive investments over this period to equip our professionals with the most advanced technology tools.
Defining High Performers
Our experience is consistent with the latest findings from Accenture’s High Performance IT research, which looked at 226 of the world’s largest private- and public-sector organizations in North America, Latin America, Europe and the Asia-Pacific region. We define high performers in IT as those that achieve excellence in three distinct areas—IT execution, agility and innovation—balancing the constant and sometimes opposing demands placed on today’s IT function.
High performers in IT manage information technology like a business, and run the technology operation for and with the business being served. CIOs in these organizations are deeply engaged in mapping their company’s business strategies and then envisioning how IT can best support those strategies.
When we conducted detailed assessments of these IT organizations, we discovered that they spend 29 percent more annually on developing and implementing new applications, rather than spending more on older applications that were delivering less. They are 44 percent more likely to recognize the strategic role IT plays in increasing customer satisfaction, and they were eight times more likely than peer IT functions to measure the benefits realized from IT initiatives.
So when it comes to tweak versus trash, the results from our 10-year billion-dollar experiment are conclusive. The faster you leverage the latest technology, the sooner you benefit from it. The longer you retain a legacy technology, the more it drags down performance, and the higher the price you pay in the innovations that are sacrificed.
Looking back over all the decisions made over the last decade, we would not have changed anything, except this: Everything we did, we would have done even faster.
Frank B. Modruson has been the CIO of Accenture since 2000. He oversees all business applications and technology infrastructure, enabling employees to serve clients in 120 countries and work anytime, anywhere.