IT: Strategic investment or cost of doing business?

My view is that whether IT is a strategic investment or a utility cost depends on what the company needs information technology to do. If information technology is a key element of the firm’s product, service, operations or strategy, then IT should be viewed as a strategic investment.

Wal-mart, which uses information technology to drive costs out of the supply chain, is a good example. Wal-Mart, which one does not think of as a technology company, is a leading force in adoption of new technologies, such as Internet-based EDI and RFID.

On the other hand, if information technology is not a key element, then it should be viewed as a cost of doing business, seeking to maintain acceptable levels of service with managed levels of risk, at the lowest cost.

Of course, there are several positions that a firm may take between these two ends of the spectrum. One may view IT as a strategic investment but still not be leading the charge for new technologies, as Wal-Mart is doing. On the other hand, one may view IT as a cost of doing business yet still make significant investments in new systems as a platform for growth.

What’s needed then, is for management to step back and decide the objectives for information technology, how well do the current systems satisfy those needs, and what are the actions, resources and spending needed for IT to meet those objectives–in other words, an IT strategy.