How to Get More Money in Your Budget
The mantra now is "do more with less" and, for the most part, IT has responded admirably: per-worker productivity is up, communication and collaboration is easier than ever, and typical uptime is in the high "nines."
But sitting back and enjoying the fruits of this labor is hardly on the agenda. Regardless of what you did yesterday, tomorrow beckons. In IT that means more projects, more innovation, more enablement provided in less time with less cost and fewer mishaps.
As veterans of past failures (think ERP, ecommerce, CRM, etc.), from the board room on down, most corporate managers have lost their glassy-eyed rapture with the promise of technology. Today, while they may still look at IT with a bit of wonder and awe, they see it as just another department granted one with a demonstrated ability to transform the business in ways few thought possible just a few short years ago.
And this means, like your counterparts in sales, marketing, operations, HR, etc., you, as the CIO, have to make a serious business case for justifying any increase in budget.
Today, the median IT budget is two-percent of revenues; the highest it's been since 1997, said Frank Scavo, president of Computer Economics, a research and advisory firm focused on the strategic and financial management of information systems.
According to CE, IT operating budgets also rose 4.1% in 2006 and appear to be headed for a similar increase in 2007. Good news for any IT manager but these increases do not account for capital expendatures, which means you will be able to keep past projects going, but finding money for new initatives is probably going to be just as hard this year as last, and the year before that, and the year before that.
Of course, this is all industry specific, but that is beside the point: getting more money to run your operation and fund new projects is key to keeping IT in the fore when it comes to helping your company innovate and gain market share (if, of course, that is what they want to do again beside the point. Let's assume they do.).
So that brings us to, literally, the multi-million-dollar question: How do you approach management so that your request for more funding either on a project-by-project basis or as a percent of total revenue is taken seriously.
As you probably already know, there is no one correct answer to this question but there are many ways to couch your requests so they are viewed in a more favorable light.
Send in the Troops
The trick is to understand what makes your business tick, said Joe Gillespie, a partner with B2B CFO, LLC, an interim CFO staffing organizaiton. Over a 25-year career and prior to joining B2B, Gillespie served as CEO, CFO and a CIO for different companies.
Whether it's increased productivity, faster time-to-market, cost reduction, top-line growth, bottom-line growth, greater innovation, etc. all of these goals can be aided by IT in some form or another. So you have to approach decision-makers with what they want in mind, not just a laundry list of hardware and software that IT "needs" to do it's job better.
"A lot of times the technology people get caught up in the technology aspects of it and when you interject some of those buzz words people's eyes glaze over and it's more of a turn off," said Gillespie.The approach Gillespie advocates is to get others in the organization to do your pitching for you. Create a broad-based coalition among your peers by spending time in their domains; find out what they need, want and desire from technology and then have them pitch the company's president for those things.
"You have to create the vision of where you want to take the company from a technology perspective but you have to sell it indirectly to all the business units and have them champion it and see the vision as well."
Anther approach, one advocated by CE's Scavo, is to apply tried-and-true financial metrics to your arguments. He likes something called EVA (economic value added). EVA is a financial model that spells out the financial benefits of corporate investments in financial terms.
If you think a new CRM system will generate big returns, prove it. Dont just tell your bosses they need to do it because the competition just did.
"And that can be particularly effective because it's expressing the benefits in language that the decision-maker typically understands and uses for other types of investments in the organization," said Scavo.
It's also important to understand that IT requests, while often being made for the benefit of other departments, are up against other requests from those same departments for more funding. Hence, combining Gillespie's use of the broad-base of support approach with EVA and other approaches is another option.
The Advantage of Risk
For former CIO Marty Mercer, also a partner with B2B CFO in Denver, an effective tool was the risk-approach. It is kind of a scare tactic but if your company is indeed putting itself at risk regulatory, security, or competitive then by all means, play the card. If it is not, then don't. Use another approach.
But the tool Mercer prefers is to educate decision-makers to the importance of IT to the business. This way, future efforts are easier and better understood by those holding the purse strings.
"And I think if you approach it from that perspective you really start getting yourself in a safe harbor; getting yourself into a place where the arguments of getting more money end up becoming easier and easier because what happens is the mindset of the decision-makers changes from that of being 'Okay, this is cost overhead that I have to contain', to 'Okay, this is an opportunity for us to generate more revenue using information technology'," said Mercer.
Another former CIO now with Tatum, LLC, an interim CIO staffing firm, Bill Huber has been on the inside of these approaches for years. He sees IT as having a credibility gap that must be overcome before any meaningful re-instatement of IT as a department that drives the business forward instead of just being a cost-center.
If you are up against this type of perception at your firm, then all of the above methods will help. You also have sell IT's successes at every opportunity you have to demonstrate IT's value to company.
"More importantly it goes to the strategic issue," said Huber. "If IT is only providing support services then the budget should be cut because at that point it's turned itself into a commodity. So, the key is to make IT not a commodity, but to make it a core part of the business."
To do this, talk about the ways in which IT can and does make a difference. And stay away from technology for technology's sake type of arguments.
"I always view myself as the advocate of the IT team," agrees B2B's Mercer. "So my job is to go in and say look at what a great job we're doing."
Of course, all the best advice in the world is just that, advice. You have to figure out what is going to work with your decision-makers and apply it. Not everyone is going to respond to the same approach; it's not used-car sales but it is sales, so do what works.
"It's a holistic approach," concludes B2B's Gillespie. "I think you need to do a little bit of everything."