Research has shown that about half of all adults make New Year’s resolutions. However, fewer than 10 percent manage to keep them for more than a few months. With that in mind, we recommend CIOs stick to a single resolution for the remainder of this year: rethinking your IT budget.
Addressing current challenges
In the eyes of some business leaders, IT spending is out of control. The culprits? Weak governance, historical budget allocations and overreliance on industry benchmarks.
Weak governance. Weak governance can lead to lack of accountability. One CIO who had a massive backlog of IT projects struggled to meet business demands for years. After investigating the root cause, he discovered that business leaders significantly exaggerated the business benefits of their IT projects to gain higher priority; no one measured actual benefits.
Historical budget allocations. Treating operations costs as fixed is a common folly. For many years, 70 cents of every IT dollar spent supported existing business operations. With the shift to the cloud, that figure is closer to 60 cents now.
Overreliance on industry benchmarks. Many industries have relied on peers to help them define their technology spend, believing that companies in the same industry or sector have similar technology needs and thus similar technology budgets. That doesn’t hold true anymore thanks to technological disruption blurring lines across industries. Other factors that skew industry averages include legacy systems, upgrade cycles, historical investment mix, maturity of IT processes and multiple companies with one-time transformation expenses.
To set and keep New Year’s budget resolutions, CIOs must break down three commonly held misconceptions: that increased IT budgets symbolize the value of IT, that shadow IT can be helpful, and that every IT investment should have positive return.
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