In the 21st century, it is hard to think of any part of a business that could reach its goals without IT. This change in IT’s significance needs to be reflected in how organizations budget IT expenses. CIOs can ensure IT’s effectiveness and efficiency only with a distributed funding approach.
- Key Question
- Opportunities and Challenges
- How This Report Will Help
- IT is second only to people as the enterprise’s most critical resource
- Demand for IT is exceeding supply when spending is capped
- Responsibility for IT spending must be separated into supply and demand
IT is second only to people as the enterprise’s most critical resource
- The 21st century marks the beginning of IT’s expansion into the front office
- Digital business makes IT the business executive’s second-most-critical resource
- The time business executives spend on IT issues should not be based on the percentage of revenue spent on IT
- IT economies of scale
Demand for IT is exceeding supply when spending is capped
- Spending on new IT capabilities is increasing, adding costs to the IT operating budget
- Business executives in many enterprises have reduced funding of the IT operating budget for three or more years
- Underfunding the operating budget creates shadow IT and increases risk
Responsibility for IT spending must be separated into supply and demand
- Use business concepts to optimize IT spending
- These are not new concepts, but how to implement them is new
- Step 1: Learn how to properly define IT business services
- Step 2: Learn how to properly cost IT business services by implementing a standard (not an actual) cost system
- Step 3: Schedule meetings with representatives from each of the major functions/departments that consume the services provided by IT
- Step 4: Use the demand-side scorecard to drive behavior toward optimizing demand for IT
- Step 5: Use the supply-side scorecard to drive behavior toward optimizing the supply of IT
- Avoid common mistakes
Appendix: Case Studies
- AmerisourceBergen develops solutions for investment growth
- BankCo mounts an aggressive cost reduction campaign
- Bon Secours Health System moves IT costs to the business to boost budget wellness
- Granite Construction builds the case for better alignment of IT project spending
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