Auto suppliers fail to leverage full value of IT
By Staff -- Manufacturing Business Technology, 10/1/2006 12:00:00 AM
Automotive equipment suppliers choosing to reap the full potential of information technology are enjoying stronger management commitment for additional IT investment. Those that don't find themselves constantly seeking new ways to reduce costs, according to a study by New York-based Deloitte Consulting and the Original Equipment Suppliers Association.
Manufacturers, in general, invest about 4 percent of revenues on IT, while automotive equipment suppliers see only about 1.2 percent being allocated to their IT budgets.
“The concern is the lack of awareness for how IT management adds value to organizations,” says Jeff Glueck, partner in the Deloitte Consulting automotive and technology practice. “The majority of CIOs continue to operate in the role of services provider, when what they need to do is to figure out how to contribute value back to the organization.”
Too often, Glueck adds, upper management views IT as a cost center—and for good reason.
“About 60 percent of organizations [surveyed] lack good performance metrics, nor do they present the business case for IT to upper management,” says Glueck. This results in low IT investments overall for the industry sector, and leaves IT departments vulnerable to cost cutting.
The situation is compounded by the fact that as much as 40 percent of all IT projects fail to come in on time and on budget. The picture gets even cloudier given the inability to deliver adequate IT training & development programs, and the associated difficulty in attracting and retaining talented professionals.
“When IT is viewed as a service provider, the focus of management is to drive costs down to the lowest common denominator,” Glueck says. “Where IT is viewed as a business partner, however, we find the CIO has a seat at the table. Their budgets increase as they deploy good business metrics for how to add value.”
Glueck believes the first thing IT departments need to do is put a strong governance process in place that will aid decision-making. “They also have to improve performance metrics, develop the business case, and establish project-management disciplines to support them,” he explains. If they don't, “They run the risk of becoming a commodity and being outsourced.”
Getting an accurate read on IT budgets is difficult because a lot of money being invested on the shop floor doesn't get accounted for as IT, Glueck adds.
“The CIOs who get beyond their back-office and network budgets are gaining credibility with management,” he concludes. “To be an effective IT leader, you have to take control of this space.”
