Is Enterprise IT Crazy?

In behavioral economics, it has been demonstrated that people behave irrationally—but in predictable ways. It stands to reason that predictable irrationality exists around IT too. In an article for CIO magazine, Hakan Altintepe examines the ways that IT might be off its rocker and what to do about it.

Conflicting Motivations

When it comes to gains versus losses, people are statistically risk-averse toward gains and risk-seeking for losses. This is described by the endowment effect, which describes “the observation that a good often appears to be more highly valued when it is part of an individual’s endowment, compared to when it is not.” When placed into the context of IT, Altintepe finds that businesses treat IT too often as just a “cost of doing business,” and that cost is spent to maintain schedules and avoid outages. Being innovative and proactive does not factor into this money-pit philosophy, and so Altintepe does not blame IT for not delivering innovation under these circumstances.

Of course, this perspective of thinking of IT in terms of affordability rather than opportunity must change:

On the side of the gains, workforce transformation programs promote new cultural traits such as proactivity, risk awareness and sense of accountability, enabled by an enhanced performance management and leadership recognition framework. … On the side of the losses, there are quite a few management practices available, which promote resource sharing (e.g., competency centers, resource pools), control sharing (e.g., product/ service management, cross-functional/organizational governance bodies), and to some extend funding fungibility (e.g. IT investment pools). Sharing technology investment risks between the business and IT seems to be the next plausible option to further level the loss function of enterprise IT.

As long as the business fixates on IT’s costs, then IT is going to act from an affordability mindset—opportunities be damned. That means everybody is a little crazy in this situation until IT can more clearly convey its potential value to the business.

For deeper details and examples of these principles, view the original article here:

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