Balancing the IT Budget
Jim Harris in Sponsored Blog Posts tagged Cloud, Enterprise CIO Forum, HP, IT Thursday, August 9, 2012 at 9:00PM This blog post is sponsored by the Enterprise CIO Forum and HP.
While checking out the new Knowledge Vaults on the Enterprise CIO Forum, I came across the Genefa Murphy blog post How IT Debt is Crippling the Enterprise, which included three recommendations for alleviating some of that crippling IT debt.
The first recommendation was application retirement. As I have previously blogged, applications become retirement-resistant because applications and data have historically been so tightly coupled, making most of what are referred to as data silos actually application silos. Therefore, in order to help de-cripple IT debt, organizations need to de-couple applications and data, not only by allowing more data to float up into the cloud, but also, as Murphy noted, instituting better procedures for data archival, which helps more easily identify applications for retirement that have become merely containers for unused data.
The second recommendation was cutting the IT backlog. “One of the main reasons for IT debt,” Murphy explained, “is the fact that the enterprise is always trying to keep up with the latest and greatest trends, technologies and changes.” I have previously blogged about this as The Diderot Effect of New Technology. By better identifying how up-to-date the IT backlog is, and how well — if at all — it still reflects current business needs, an organization can skip needless upgrades and enhancement requests, and not only eliminate some of the IT debt, but also better prioritize efforts so that IT functions as a business enabler.
The third recommendation was performing more architectural reviews, which, Murphy explained, “is less about getting rid of old debt and more about making sure new debt does not accumulate. Since IT teams don’t often have the time to do this (as they are concerned with getting a working solution to the customer ASAP), it is a good idea to have this as a parallel effort led by a technology or architectural review group outside of the project teams but still closely linked.”
Although it’s impossible to completely balance the IT budget, and IT debt doesn’t cause an overall budget deficit, reducing costs associated with business-enabling technology does increase the potential for a surplus of financial success for the enterprise.
This blog post is sponsored by the Enterprise CIO Forum and HP.
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Reader Comments (2)
Hi Jim,
Thanks for you post. I fully agree with the second and third recommendations which are in line with setting up a better Demand to Budget process within an IT organization. Which means demands have to be better prioritized at the very beginning of the overall process and also be brought in relationship with their relevance on the IT strategy, critical business capabilities or business processes.
If this will be done organizational wide which I can see more and more within the last few years this brings a lot of potential for consolidating demands or fact based reasons to decline and postpone demands.
If the next stage of the Demand to Budget process includes an architectural check which uses company wide standards even better as this will prevent bringing more technologies and legacy systems to the IT organization as you described.
Taking these steps into consideration will allow the Program Portfolio teams to make better decisions and to prioritize based on prioritization schemes like Business Value, Architectural Impact, Project Risk and Strategic Value. At the end of the day, it is nothing else than integrating the different IT portfolios and putting them into a nice and slim Governance process.
Why don't I agree so much with the first recommendation the application retirement?
I can see that organizations again and again start these programs which for sure also bring some benefit but on the other hand also cost a lot of money. The point is: if an organization is not following a simple governance process as described above they will have to do that year after year trying to fix a problem which shouldn't even have occurred at the beginning.
There also is recent and interesting study from Nucleus research that found that most companies don’t understand the effects of IT budgeting on their capabilities – less than 40 percent of companies believe their IT forecasts are even half right: Nucleus Research - IT Budgeting: Perception and Reality (Download requires Registration).
With so much to gain in terms of efficiency and new capabilities, IT budgeting has to become more standardized and align with the needs of the business, not set by arbitrary benchmarks.
Regards,
Thomas
Jim, thanks for your interesting blog post. The numbers from last year's Capgemini Application Landscape Report underline the need for cleaning up the IT landscape: on average 20% of an enterprise's applications are redundant.
Yet a study we did with Nucleus Research (see the link in comment by Thomas above) found on average IT decision makers have to deal with information that is 14 months old and only 55% accurate.
Obviously, it is still a big challenge to safely identify applications that can be retired and to wisely spend IT money.