e-Talk Radio: Rubin, Howard, 18 January 2001

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at the cost structure of IT in Europe, for example, Germany is much more expensive in labor but for the same revenue base in the US versus Europe, European companies are on the average ten to thirty percent more efficient in applying their IT resources to the business.

Dekkers: And that's...tell me more about that...what do you mean by more efficient in employing their IT resources?

Rubin: Well, the top line measures if you look at IT's spending for revenue, which is not the ultimate measure, but if you take a look at how much revenue they're supporting per IT dollar, European companies for the same size revenue are able to be more efficient at IT resources as measured from the economics and supporting revenue and income and the change in those through the resources. US companies are less efficient in sort of their frontiers in general. We're finding US companies are higher innovation, and the higher innovation is good in some ways, but it also drives down their productivity because their people are always absolutely on the learning curve. A lot of European companies play fast follower, which means they're not dabbling as much on the fringe and they're able to turn much more of their investment into revenue support and profitability. So per IT dollar, a European company and a company in the US that's spending four percent of revenue to support the business in IT, the equivalent company in Europe is probably around 3.2%.

Dekkers: Oh wow, that's a pretty major difference.

Rubin: Yeah, IT dollars become more and more part of the expense base of a company. Most companies don't understand their IT cost of goods, but when their IT cost of goods, whether that goods is intellectual product, whether that good is a manufactured product, it's blowing their cost structure away and knocking at our global competitiveness.

Dekkers: Right, now as a listener, we've got a listening audience that has QA managers, test managers, middle management mostly, and as their organizations start kind of turning this huge mothership I guess you could call it, as we're turning this slowly in the direction of starting to do more portfolio management, what can these QA managers, the test managers, what can they do in their jobs to start preparing for this?

Rubin: Actually, they're right in the middle of it. Just go back to the portfolio management metaphor and forget about IT for a moment, and anyone who's listening to this just think about their own portfolio investments, whether it's in their retirement funds, or 401(k)s, whatever their personal investments are. When you look at the investments you have, clearly you look at the amount invested in different kinds of instruments and commodities, but what differentiates those instruments is, when do you get a return from how far in the future, what's the level of risk, and what are the quality of those investments? So if you just pull that back into IT, that pivotal role of people, whether that quality manager or the process of program managers around software process improvement, fundamentally they are the gatekeepers and managers of a lot having to do with being able to calibrate and monitor the quality of investments. And even when you look at the CMM, the software process stuff, look at the historical charts going back to '87, they talk about the change in productivity and quality in management of risk, so the interesting thing, the context of process management and quality management, quality assurance are all mechanisms that focus on a typical portfolio of activities, the management

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