Auckland University's Ilan Oshri argues excessive emphasis on just 'keeping the lights on' is holding firms back from pursuing much-needed, transformational IT initiatives

By Ilan Oshri*

An excessive emphasis on just “keeping the lights on” is holding firms back from pursuing much-needed, transformational IT initiatives.

Innovation is key for the firm’s growth and its competitiveness. Innovative firms are more likely to outperform their competition, attract superior talent and enjoy the trust of their customers and vendors.

In today’s highly dynamic and demanding business environment, firms must rethink how IT innovation can be achieved while maintaining and running existing systems. As the speed of introducing new technological and service platforms, such as Internet of Things (IoT), artificial intelligence, and blockchain accelerates, keeping up with the competition has become increasingly challenging.

The trick for CIOs is to allocate a significant portion of the IT budget to innovative projects while ensuring that you are keeping the lights on in an efficient and effective manner. Is this feasible when ongoing operations consume 80% to 90% of a typical IT budget?

My research collaborators and I were commissioned by Rimini Street Global to undertake a global IT innovation study, for which 900 IT decision-makers from diverse economies and sectors were surveyed between January and March this year. We found that:

  • 98% believe that their organisation needs to increase IT innovation spending
  • 71% are worried about how their organisation will find budget for IT innovation
  • 83% acknowledge a link between spending on IT innovation and the firm’s competitive position
  • 64% say their board shies away from transformative projects that integrate the entire IT infrastructure
  • 63% say their board focuses on cost cutting rather than innovation
  • 77% indicated that the biggest blocker to achieving innovation in their organisation is the over-spending on ‘keeping the lights on’
  • 74% stated that current contracts with service providers do not accommodate innovation
  • 63% feel that they are locked in to current relationships with service providers, thus lacking the ability to explore other options to innovate through partnership

Growing pressures on IT spending, over investment in keeping the lights on and a slow pace of innovation from technology vendors is putting firms at immediate risk of losing their competitive edge. They must up their game and consider radical strategies that will enable innovation now. Critically, innovation must be understood as a collaborative effort that involves end-users, stakeholders and vendors. Firms that have adopted this approach have sped up their innovation process, shortened the intervals between introductions of new services and shortened time to market.

In our report, we outline several strategies for escaping an innovation paralysis:

  • Reduce your “keeping the lights on” costs by contracting out the optimization of existing IT and software assets, and redirect savings to innovation activities.
  • Develop a service-innovation model with your service provider to ensure that while your provider is committed to delivering a lean and efficient service, it is also compelled to deliver transformative innovation. Firms must now seek service providers who are willing to engage in a service-innovation relationship, co-develop the client’s IT platform roadmap, and be a true partner for their clients. 

Read the full report here.


*Ilan Oshri is a Professor at the University of Auckland's Graduate School of Management.

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12 Comments

I'm often surprised by the lack of investment in even core IT business support. Big banks still text command based maintenance systems. It's not sexy or cutting edge but it does bring in the money. Their IT road maps are written on parchments at this point.

Asking them to prioritise spending on the latest trendy tech fads...It's a pipe dream.

"the latest trendy tech fads"... there is your reason.

Banks need to be security focused not the keeping up with the joneses on fads that have very little benefits with a massive impedance to implementation and an infinite list of flaws that come out of the woodwork like a Lovecraft horror. Things that have resulted en masse from fads jumped on too soon are similar to:
the mass privacy breaches and data loss from poorly implemented cloud storage & services, (along with America randomly deciding all the data needs to also be passed to them or the cloud service shut down with raids),
virtualisation which while excellent has also resulted in many images not being kept updated or even adequately backed up or managed to scale with many being poorly configured to start with, (more data breaches and lots of data loss),
social media which released a PLAGUE of viruses, scams, and privacy hacks,
mobiles which took one look at the outflow from social media and went at it with intensely more buggy gusto,
and blockchain which offered absolutely no technical benefits above a versioned database pool and SIGNIFICANT data loss, hacks, releasing of private data, broken updates, flawed deployments, inability for legal ownership & management. That is in essence taking a working set of services & data and hawking it off in a marketplace for some blinking flashing lights to amuse the kids with.

That was only some of the fads which banks looked at in projects before they went mainstream. Heck there have been several more. They literally lead development and engineering because they can with a lot of financial backing and financial incentive, unsurprisingly. The trading & market AI, and communications centres are top notch. They still can cause flash crashes but only the plebs really loose out at that point, they cannot compete with millisecond response times. Just look at the speed at which trading floors changed to online services where only AI can really compete.

Looking back the cutting edge is exactly that, cutting. Best let a lot of fools run off the cutting edge first and then walk on the mountain of their corpses with better engineered solutions that offer better security, not behind but across with better design, deployment and in line with legal practices. Better to spend on security and service output than following fads, (and I say that knowing how easy it is to hack and scrape data from most devices). Very rarely are you going to look to the Facebook app on your mobile to make your transactions in Garlicoin over a hacked cloud server which has not been backed up so it can go down & lose your data right after letting that nice Russian know your account details. (Been there, seen that a few times). What you haven't seen is that new fads of today were already explored for potential by banks over half a decade ago. They literally have been leading while you were staring at their exhaust wondering why you cannot see them implementing the exact shit that then in the follow up gets easily hacked and broken. Could it be the engineers could see some of that coming ahead and decide to actually approach things as engineers rather than fashionistas. If you can not see a dilbert comic strip in that you have given yourself away replicant human.

Easily the best IT-focused comment I have ever read. My own inclination is to follow the old, old advice: never be the first to buy a New system, and never be the Last to exit an Old one.....

There's just too much opportunity for screwage at each end of the product life cycle. There are international firms who have made a handsome living from buying up old systems with a locked-in user base, firing the R&D types, putting in cheap maintenance bodies to replace them, and jacking the annual fees to infinity and beyond.

As for new fads (and what a succinct description That is!), let the usual lemmings implement 'em, and keep an eye on the bottom of the cliff....

The real issue with IT in NZ is that everyone talented ends up leaving because the wages here are mediocre. Everyone good in NZ goes to Australia, and everyone good in Australia goes to the US.

Indeed, although there is more encouragement for Europe than the US in many ways... could be the people, & projects offered. Business focus versus engineering & science focused. Go to America for a startup, Europe for the LHC. Australia is just better all round than NZ. Pity because NZ is where their families keep all their stuff.

This is absolutely true and not only with IT. It is kind of like soccer where poor countries can produce some magnificent players (e.g. Mo Salah from Egypt) who always end up in clubs in rich countries like England. This is why the whole popular tune of "make economy innovative", which is played by all political parties but specially Reds and Greens is simply day dreaming. All the best human capital will leave to places that have financial capital and synergy even if they start at NZ. NZ will never be able to compete with the likes of US, China, UK or even Australia for that matter. There are absolutely no competitive advantages in NZ. Zilch.

True. This explains why Xero delisted itself from NZX and chose ASX for sole listing. The financial capital here is restricted to buying nest eggs.

Overall, the article reads like a typical academic whinge about the difficulty of commercialising the latest shiny toy. It can be summed up as:

'Why don't these obtuse commercial types take a leap into the unknown, raise their risk profile to Buzz Lightyear levels, and chant the Hopey Changey mantras that We Who Can See Further have designed to salve their Doubts?"

IT only administers, marshals and tabulates. It produces nothing, which means that the more folk attempt to wring a ' living' from it, the more something (or someone) else must be actually doing something. Same goes for all salespeople, rentiers ......lawyers, you're with that lot......

It's something almost nobody understands. Or maybe that's ' wants to understand'.

""98% believe that their organisation needs to increase IT innovation spending"" now why does that remind me of IT managers before Y2k? Something to do with empire building and enjoying being wined and dined and smarmy compliments from IT salesmen. Strange how they had all those conferences and special meetings about Y2k and one minute after the new century arrived it was deafening silence.
Back to the real world: "keeping the lights on" is not sexy but a serious IT failure causes a business to die. Novapay for example - if NZ education wasn't a public service it would have died. My experience was a retailer would desperately search for the smallest advantage over their competitors - if it involved major financial investment in IT then so be it; on the other hand working for lawyers the only quesion was "who else is using it" and nobody would risk innovation.

Final point 'innovation' is overrated, being alert to opportunities under-estimated. Remember lotus? or its predecessor Visicalc? Or Betamax and VHS? And the history of social media and web browsers. The great thing about 'innovation' is it keeps business consultants employed.

Most NZ businesses tend to view IT as an ancilliary instead of a core component and completely miss the massive productivity gains that come with doing so...and focus instead on making do with that stupid number 8 mentality....

Personally I think it is worse than that - people are given technology but just don't know how to use it or indeed it's limitations. I am an IT / network janitor.