How companies waste billions on IT - TechCentral

How companies waste billions on IT

Safika Asset Finance CEO Mdu Gama

The public and private sectors squander billions of rand every year because of poorly thought-through decisions to invest in information technology systems and software.

Worse still, many organisations don’t know how to measure the return on investment from their technology projects.

These are the views of Mdu Gama, Soweto-born founder of Safika Asset Finance and the first person to be awarded a PhD in finance by the University of Johannesburg (or its predecessor, Rand Afrikaans University).

Gama’s doctoral thesis focuses on capital investment in IT. In it, he concludes that although SA organisations spend more than R60bn a year on IT, decision-makers often make those investment decisions without any clear idea of whether they make economic sense.

Too often, IT investments go over their budgets and don’t address the objectives they were meant to. Also, many are scrapped before they are completed.

“There’s a lot of denial,” Gama says. “If you’re making decisions about IT investments and someone suggests to you that you might not be doing things properly, you tend to go on the defensive.”

Gama says he hopes his thesis will spark a discussion around IT spending and how organisations can strengthen their decision-making when it comes to technology investment.

Measuring the costs and returns from IT spending is difficult as they are often intangible. But companies need to try, he says. It’s “quite scary” that many organisations are denying that there’s a problem.

“Too often, investments are made purely because we are being intimidated [by suppliers]and told we cannot afford not to spend on IT.”

In government, Gama says technology suppliers often write tenders. “There’s nothing wrong with getting input [from suppliers], but there are a number of tenders I have read and I can tell you which supplier designed it. There is definitely something wrong there.”

A shortage of skills plays a big part in poor decision-making, Gama says. But there’s also widespread denial that “the way we do things is probably not optimal”.

Too often, the financial tools used by company’s finance departments are hopelessly inadequate in evaluating technology investments. Most of the tools used by corporate SA can’t incorporate the “very crucial intangible costs and benefits associated with IT investments”.

“These tools were designed during the industrial era when IT was not that important.”

Another problem in many companies, including large ones, is that IT directors are usually a level removed from finance directors in terms of their seniority.

In organisations with large IT spend, like banks, the person responsible for technology ought to be regarded as a peer of the chief financial officer, he says.

There also needs to be more effort made in breaking down operational silos to encourage greater information sharing and collaboration between corporate functions.

Gama, who started Safika Asset Finance to provide technology rental solutions, has significant experience in the IT field. He was founding GM of Australian company RentWorx’s SA office. He later left RentWorx to start Meeg Asset Finance, which he sold to Absa.  — Duncan McLeod, TechCentral

  • Can we get a copy of Dr. Gama’s thesis?