Gartner Research

Determining the Right Level of IT Operational Spending

Published: 01 October 2012

ID: G00239146

Analyst(s): Michael Smith , Kurt Potter

Summary

IT financial and operational performance is under tight scrutiny, yet many business executives set spending levels arbitrarily. To prevent IT underfunding, CIOs must communicate the value of IT operations and use IT business services to connect operations to business outcomes.

Table Of Contents

Foreword

Executive Summary

  • CIOs need a better way to communicate the value of IT operations
  • Use IT business services to connect IT operations to business outcomes
  • Use IT business services to optimize the level of operational spending

CIOs need a better way to communicate the value of IT operations

  • Most business executives do not understand IT operating expenses
  • Misunderstanding IT operating expenses leads to IT underfunding, which hurts the business
  • CIOs are responsible for avoiding the harmful business effects of IT underfunding

Use IT business services to connect IT operations to business outcomes

  • CIOs must explicitly define and validate IT business services
  • Best practices for defining and maintaining the IT business service portfolio
  • Determine and monitor the costs of IT business services without creating an administrative burden
  • After defining IT business services and determining costs, let the business decide how much to “buy”

Use IT business services to optimize the level of IT operational spending

  • Benefits occur at each step of the process
  • Use a market approach to optimize IT resources
  • Avoid common mistakes
  • Limited governance makes it all work
  • Conclusion

Appendix: Case Studies

  • Catholic Health Initiatives aligns IT services, costs and business needs
  • A transparent IT operating budget shows IT’s true value to McKesson’s business units
  • Mesirow Financial redefines IT business services to validate its IT operating budget
  • Budget cuts force an academic CIO at The Ohio State University to redefine IT business services
  • Volvo IT sets the right level of IT operational spending with clearly defined business services

Further Reading

  • Core research

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