Is TCO a strategic topic?

Multiple studies on ICT main topics have put TCO/cost as a key agenda topic for the CIO. But is TCO actually a key element? Is cost a strategic driver for ICT?

If you talk to the CIO, the cost of delivery of the IT operations is a topic on which he is quite often challenged. I used to ask CIO's I met and who are not members of the executive committee (and by the way most CIO's are not) how often they are asked to talk about ICT on the board level.
It is a reality that most CIO's are called to the board mainly to present there ICT plan (besides the call to come and explain a crisis/escalation/serious problem situation). At that occassion the main topic turns to be cost/budget.
So should we blame CIO's to be concentrated on costs? They are somehow conditioned to always talk about cost of operations and projects (maybe because that way the other boardmembers avoid that too technical subjects, which they can not follow, are put on to the agenda). The fact is that the CIO is often perceived in lots of organisations as a costcenter manager who spend about 2/3 to 3/4 of his/her budget on keeping the shop running (call this operations costs) and is asking always for more money. If that is the situation you are in, than the total cost of your operations will get the necessary attention and will make sure you find ways to optimize, source better, reduce complexity and save money. Cost is than somewhat "strategic" ... for the internal visibility of the CIO.


But what if you are the CEO of the organisation? Is the cost of ICT key?
If you consider that most ICT organisations run a budget at 1-2% of the turnover, saving ICT budget by 10 or 20% (quite an effort) will not fundamentally change the bottom line of your organisation. Efficiency is always important, but costs of ICT are not exactly "strategic" for the company and its leader. Quite some CEO's understand that ICT can add value, and that ICT is key for the operations of the company. Concentrading attention on this is much more important than saving some money left or right. This does not mean that money is not a topic. But ICT value focus brings much more the potential impact of ICT on the strategy and future of the organisation on top of the priority list of the CIO. Saving on TCO will be seen as a way to free up means for more important (=strategic) topic of the company and not as a way to "reduce costs".


Conclusion is : TCO is an important topic, but should never be a strategic topic. The focus on "value adding" of ICT is much more "strategic".