The Next Leap in Productivity: What Top Managers Really Need to Know about Information Technology

2.3. Why IT Matters

Despite popular notions to the contrary, companies still spend far more on salaries and employee benefits than they spend on IT. Most corporate IT budgets are mere fractions of what is spent to run traditional functions such as sales, marketing, research and development (R&D), production, customer service, distribution, and maintenance.

That being said, the costs of IT are not trivial. Every year, more tasks are turned over to the IT department or outsourced. To an increasing extent, IT manages the outsourcing. You do not need a degree in economics to foretell that IT budgets are likely to grow as the budgets of departments shrink.

Some futurists predicted that automation and outsourcing would increase efficiency and productivity to a point at which IT spending could be safely reduced to bare minimums. In retrospect, that seems a bit like saying that when the farmer finishes plowing his fields, he can go ahead and shoot his oxen.

In any event, arguments over the costs of IT miss the point. If the first job of IT is driving down operational costs through the automation of routine tasks, its second job is helping the company achieve competitive advantages in the market through speed, agility, and consistency.

Saving money is nice, but making money is even better. When managed properly, IT helps companies make money.

Managing IT poorly, however, does more than just squander the original purchase price of the technology. Years of potential growth and profitability ...