IT Spend
Making More Informed Decisions Around IT Spend
Questions around IT spend levels, allocation, alternatives and value; are issues that have been on the front-burner of CEO, CFO and CIO agendas for a long time. Historically, these questions were raised during the annual budget season – but have now become more intense and frequent as IT is increasingly intertwined with day-to-day business operations. The current economic climate is putting a stronger magnifying glass on all costs, particularly IT but we believe decisions around cost reduction alternatives are more complex than in the past – for the following reasons:
- Tighter coupling of IT with day-to-day business processes and operations – helping to achieve efficiencies and revenue growth, but also increasing exposure to operational risk
- Pervasive use of IT services as the basic mode of business (and social) communications – enabling global collaboration and decision making, but creating security risks
- New technology-driven options such as the emerging “cloud” offerings which promise significant IT cost reductions, but with the challenge of meeting the twin tests of security and strong performance
As a consequence of the above, business and IT organizations are forced to employ more sophisticated frameworks regarding IT spend – to make better informed decisions around cost reduction, redirection and alternative opportunities while mitigating the potential risks. Essentially in today’s environment, the name of the game is; ‘how to achieve more with less’.
What are the right questions to ask?
Strategic Spend – Investments and Priorities
- What proportion of spend should the enterprise earmark for strategic IT investments?
- How should the strategic projects be prioritized?
- How should the strategic spend be allocated across different categories of IT projects (e.g., foundation, enabling, distinctive)?
- How should the strategic spend be allocated across organizational boundaries?
- Are there existing business change or infrastructure projects that should be re-prioritized, and possibly deferred or scrapped?
- What are the governance mechanisms/rules around project prioritization and how effective are they?
Steady State Spend – Relative Business Value
This category covers ‘business as usual’ spending on IT applications maintenance and enhancement, user support, software licenses, routine technology upgrades, etc.
- What proportion of the budget should the business enterprise earmark for ‘steady state’ IT spend?
- How is this spend currently allocated across the organization?
- What is the relative business value of this spend and to what end is it directed (i.e., compliance, direct business value, indirect value)?
- Where are the opportunities for reduction and/or redirection of this spend?
Demand Management – Work Request Handling
- How effectively are executive decisions on IT spend linked to day-to-day demand management/request handling?
- Who should participate in the decision making processes?
- What are the implications of demand management decisions on existing IT staffing models, SLAs, and work commitments?
Supply Management – Resourcing the work
- Are our sourcing processes delivering the most cost/effective solutions?
- Are we getting the best deals from our existing suppliers?
- Are we making the most effective use of existing technologies within the organization?
- How far are we exploiting opportunities provided by the “Cloud”?
- Are we making the most effective use of our existing IT staff and also of smart people in the business?