Posted by: Arun Gupta
CIO, IT budgets, IT governance
“My marketing team is wresting part of my budget of customer facing applications and social media; at the same time, the funding for the new budgeting application is with my finance team. The IT budget is now almost 50% of what it was last year. How do I regain control over my budget?” wailed a CIO in a panel discussion on, amongst other things, trends that are likely to be a reality in the upcoming year.
The panel sympathized with the protagonist CIO and a few from the audience attempted to offer solutions. The debate threw up some interesting thoughts on how the budgetary control could be retained with IT. Ranging from bureaucratic rigmaroles to bullying and many other similar trending behaviors, the suggestions were analyzed and discarded as untenable for either being against core values or not implementable without inflicting self-damage.
The IT budget has been a discussion point for some time now. It predicted the investments made by companies on technology enabled solutions. The industry created benchmarks around the investments linking it to the top line, graded by industry. The maturity of IT usage was linked to this figure and anyone spending below the benchmark was seen as a laggard or highly efficient.
Then came research reports on innovation versus business as usual; ranging from 70% – 90% of the IT budget being consumed on keeping the lights on, while the remaining pittance being allotted to new projects or innovation. Anyone with BAU numbers under 60% was envied and deemed better aligned to the business. Models were created to turn the ratio upside down and reduce the operational budgets to strategic initiatives.
Economic cycles threatened available monies and CIOs were put under the scanner on every penny (or cent or whatever currency you like) they spent. Do more with less was the mantra, and that is now the new normal. Every disruptive technology was seen as the next silver bullet to help the CIO in improving the dialogue on keeping the IT budget to a respectable ratio to the revenue. Cloud will save money, move everything to Operating Expense; virtualization will save the enterprise IT …
In one of the companies I worked, the IT organization was empowered with the operating expense budget, and incremental innovation on existing technology stacks. There was a discretionary budget for exploration of new trends and technology. New projects and initiative budgets were discussed with the business, and IT advised the funding requirements which rested in the business P&L. This ensured that the accountability for the projects was an equal responsibility shared between IT and the function. The success rate was high and everyone loved IT. Since then I have followed this practice successfully in every company.
I believe that keeping the number in the CIO spreadsheet or the business spreadsheet does not take away the control from either. Mature enterprises and CXOs work together to solve real business problems and not bicker over where the budget lies. When was it about control or the power of the budget, large or small? If the CIO is partnering with other CXOs and is focused on the corporate agenda, then it is about getting things done irrespective of where the number lies.
Does this insecurity befit the CIO?