How an IT Investment Council Increases Yield and Reduces Waste

Effective IT councils will maximize investments and limit failed projects.

Enterprise investments in information technology have traditionally been included in the IT organization’s budget. Now, however, business units are increasingly making decisions about technology spend as companies move into the digital world. Gartner estimates that in large enterprises undergoing digital transformation, business-unit-based investments will effectively double enterprise spending on technology by 2020.

This increase in spending reflects the huge opportunities of digital business and the perception among executives that speed matters in seizing those opportunities. But enterprises risk putting resources into opportunities that do little to advance the strategic agenda, and may miss opportunities to leverage business-unit-based investments across the enterprise. For these reasons, many companies are employing IT investment councils, also known as IT governance councils, to maximize outcomes and minimize waste.

The council’s job is to rank and approve investments, not to run the IT organization.

“As enterprises increase their spending on technology in pursuit of digital business, CIOs need effective IT investment councils to maximize the value of investments involving IT,” said Richard Hunter, vice president and Gartner fellow.

IT councils have three main roles under the larger goal of driving up yields and driving down waste in company technology investments.

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Ensure investments support overall business strategies

The IT council must ensure that technology investments align with business goals and the strategies for achieving those goals. Because any change that happens at scale involves technology, the investments a company makes in technology tell an important story about where and when the company will progress toward its goals and strategies. In other words, the investments approved by the council are, in effect, a forecast for what will change at scale in the company, when and how. That forecast helps the council answer the questions: “Is the company spending the right amount on IT, and is it spending those resources on the right IT?”  

Demand high-quality proposals

Ensure that any proposals considered for investment clearly describe desired business outcomes and address known risks. Any requests that don’t delineate the outcomes (in business performance terms) that they’re intended to produce literally have no value, and they divert time, attention and resources from higher-quality proposals.

Reject projects that are likely to fail

Surveys show roughly 20% of technology-supported initiatives are failures, and that number increases with the size and complexity of the project. However, unsuccessful projects often show unmistakable symptoms of failure before execution even starts. The council is responsible for ensuring proposals that are bound to fail don’t go to execution. In this way, the council reduces the enormous waste that goes with projects that fail in execution because of critical success factors that were visibly missing all along.

It’s important to remember that CIOs remain in control of the day-to-day IT budget. The council’s job is to rank and approve investments, not to run the IT organization. If the council is concerned with how much the company spends on inkjet print cartridges — an actual case — it suggests that IT cannot manage its own budget like every other business unit.

Clients can learn more about how to set up an IT council and what parties should be included in the full report The IT Investment Council: What to Do and When to Do It by Richard Hunter.

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