IT Credibility Challenge #5: Your Budget - Page 1

Apr 18, 2008

Patty Azzarello

The latest benchmarking data estimates that you spend over 70% of your time and resources keeping current operations running, i.e., keeping the lights on. Gartner estimates this at over 80%. Whatever the number, those of you I have talked with agree. It's a big number.


One of the biggest credibility issues CIO’s face is that no one else in the business understands this. In fact, the line of business managers think you spend all your time on their favorite initiatives. They don't care that you need to keep all the lights on, they just care about their favorite lights.


And the CEO and the board have stopped giving you credit for any of the existing lights, they want new, and bigger, and brighter lights. So, you have less than 30% of your time and resources to deal with what is most important to your stakeholders.


Credibility problems start right here.


You Spend a lot of Money. Period.


In the company wide roll-up, the IT budget is typically shown as a single line item and is often a bigger number than the profit for the whole company. This stick’s out. Meanwhile, your peers in the business units are being squeezed for every last bit of profit through their revenue and expense plans. And they are all looking at your number saying, “Why can’t we just cut IT?”

(This is the conversation where the “cut the IT budget 5%” directives come from.)


Everyone outside of IT forgets that you have to keep paying for things once you implement them. Nothing ever really goes away in IT. Businesses have a way of absorbing the financial benefit of an IT initiative, and then forgetting that IT investment to support it must go on.


For example, you rollout a successful ERP project, and Wall Street will reward you for cost savings or increased profits that result. But after a few quarters, that impact is absorbed into the business model and is no longer recognized by anyone. But your cost to keep it running goes on. And no one remembers that part.


As a CIO, it is critical you are able to present your budget in a way that you get to keep it. There are three main strategies for this:


  • Deal proactively with the budget issues of legacy and keeping the lights on.
  • Connect your budget presentation with critical business priorities.
  • Create more negotiating room.


Legacy Budget


As a leader in any function, a big part of your job is to make tradeoffs that create “room” to do new things. The best way to defend your budget is to be seen as someone who is managing spending. The best way to do this is to proactively reduce the cost of doing business year-on-year.


As a CIO, you need to challenge your organization to reduce the cost of maintaining the existing systems and infrastructure, before being asked to do it. Make this an explicit expectation, internal measure and habit of your organization. This should be a specific goal for anyone who manages a budget. If you don’t do this:


·      You don’t make room to do new things, and you are always seen as asking for more money.

·      You create a growing legacy of inefficiency which becomes harder to turn around every year.

·      You are not seen as “getting the job done” compared to someone who can do more with the same budget. (These are the people that end up getting more budget, by the way.)


Showing you can reduce the costs for the steady-state part of your business to make room for new initiatives will build your credibility (and help the business) hugely—probably second only to your personally bringing in more revenue.


Business Priorities


I have made several points in prior articles about understanding business initiatives from a business point of view. And communicating with the business in business terms so they understand what you are talking about. As another specific output of that process, you need to present the IT budget not as a set of line items detailing technology, but as a set of business investments which support the most critical business priorities of the company.


Page 1 of 2

Tags: XML, Microsoft, IT, IT budgets, technology,

0 Comments (click to add your comment)
Comment and Contribute

Your comment has been submitted and is pending approval.



 (click to add your comment)

Comment and Contribute

Your name/nickname

Your email


(Maximum characters: 1200). You have characters left.