CIOs need to get more from the assets they have

Cost reduction and value generation are two sides of the same bottom line

Enterprises facing tight IT budgets should not be looking at cost-cutting but should focus on working their under-used enterprise applications harder.

So said analyst house Butler Group, in a new report entitled Evolving Enterprise Application.

The report highlights the tendency in these tough economic times to focus on cutting costs. It argues that cost reduction and value generation are two sides of the same bottom line, so should be tackled together as part of a unified strategy, with savings in one area being used to fund smart investments in another.

"Cost cutting is a natural reaction to a tough economic climate, so is freezing budgets and halting additional expenditure, but these actions can be counter-productive if they are carried out in a siloed fashion with little attention paid to long term and strategic implications," said Angela Eager, senior research analyst and the report's lead author.

"Challenging times are times of change, but change also brings opportunity and that means taking a fresh view of what is being done, why, and how, and being prepared to adapt both business operations and applications," she said.

"When capital is in short supply the pressure to optimise existing resources and assets intensifies, the report said. "In the IT space, enterprise applications such as enterprise resource planning (ERP) and customer relationship management (CRM) are prime targets."

Butler feels that the strategic importance of these applications,in terms of running businesses efficiently and effectively, means that IT should rather not consider the cost cutting route.

"The background to this report is that organisations have invested heavy in enterprise applications," Eager explained. "But the sheer size and complexity often means they are not very well utilised, as it is difficult to get a good overview of their advantages."

"Organisations need to look at what is not being used, and analyse that, bringing under-utilised functionality into use, thereby increasing the ROI on these expensive assets," she said.

Eager also believes that organisations need to start viewing enterprise applications as enablers of change, not static back-office transaction engines.

"Enterprise applications are an amazing resource, and nowadays it is really about optimising and increasing utilisation rates," Eager said. She feels that enterprise applications are certainly being under-utilised at the moment, and that business units often don't have the time to look at their existing applications and how to modify them to suit new business needs.

"They often buy new applications to satisfy new demand or needs, but new applications do nothing for cost and strategic direction," she said. "People often take short cuts, and unfortunately enterprise applications are sometimes the last place they look to fulfil these new enterprise needs."

"Enterprise applications form part of the DNA of an organisation and are core to its ability to do business, but that integral status means they are often overlooked," said Eager. "They impact so many areas of the business that they become almost invisible. As a result when it comes to developing value-generating initiatives they are back of mind, yet no new initiative can be fully effective if the core it relies on is not tuned."

Eager also feels that organisations must increasingly look to tie in their back-end enterprise applications such as CRM, ERP, supply chain management, product life cycle management into content management and business intelligence systems.

"Organisations will benefit from a change in perspective in which enterprise applications are perceived as fundamental enablers of change, with the capacity to adapt to new business demands and add further dimensions to new technologies, rather than as static back office transaction engines," she said.

"The other point that is key to unlocking value is to look at things in a different, more creative way," Eager said. "Companies need to explore alternative delivery models (such as SOA), and not just concentrate one application which is operating as a single entity. There are other choices out there." She said that strategic spending is necessary to maintain the value of existing investments and deliver fresh financial benefits.