In a time of rapid technological change and increasing competition, what company is not trying to stretch its operating budgets and capital?
We are all trying to do more with less, and no department faces this pressure more than IT. Most executives now view IT as one of the most important enablers of their business expansion plans. However, when it comes to spending on IT, many companies see IT as a cost centre, and an operating cost that needs to be tightened constantly.
A 2016 Deloitte Growth Enterprise Services survey of 500 mid-market executives found IT department leaders were responsible for 49 per cent of technology adoption, compared to 36 per cent a year earlier. In fact, IT departments and technology is becoming a more reliable investment, for more business.
Even as we begin 2018 not all companies are aware of how to track the ROI of their IT spend. So when the CIO or IT manager asks for more budget to spend on an innovative technology – or a business critical IT requirement – the room stays silent. But who is to blame? The non-IT executives or the IT executives?
From our experience, companies best able to master the following five habits have been able to ensure that everyday IT spending is efficient, and that new IT investments are aligned to highest-impact projects.
1. Have an actual aligned strategy between the business and IT
Everyone has been talking about IT and business alignment for too long to mention. Companies are taking great measures to enforce planning cycles, tracking, monitoring and strategies together, but the outcomes don’t live up to the expectations.
If you start seeing your IT staff as your “innovation team”, you’ll empower more thinking from your IT department as to how to be a driver of business growth and improvement. Instead of focusing on IT’s cost, look at the areas where it pays for itself, and then some. Increasing internal efficiency lowers costs and helps keep you competitive. Not to mention IT is a means for connecting you to potential clients in an increasingly digital world.
Key questions to ask about strategic alignment in your organisation:
- Is there a clear IT strategy in place that is explicitly linked to the business strategy?
- Are all IT projects readily mapped to the parts of the IT and business strategies that each project delivers on?
As traditional business processes become more IT-driven, alignment will be imperative for market success.
2. Know when, and what, to outsource
The pressure over how to allocate scarce internal IT resources leaves the IT department and the rest of the business in a constant tug of war.
This dynamic keeps IT in a subordinate position as the business “calls the shots” on how resources and money will be spent. IT ends up running fast to keep the lights on with job orders, but lacks insight into whether the tasks they are assigned best serve the business needs.
Poor resource allocation also leaves the businesses feeling constrained by IT, whose resources are absorbed by tending to many small projects, while the business’s highest-priority initiatives are left unattended.
Instead of making IT “someone else’s problem” and hoping for better business outcomes, take charge by engaging with the best suppliers for your requirements. Develop a clear understanding of when it makes sense to outsource key IT functions like:
- Infrastructure and cloud computing
- Application support
- IT and network security
- Communications and collaboration
- Backups and disaster recovery
Demand more from your suppliers to help IT staff be more innovative and business leaders expand into new markets.
3. Better manage work volumes and know where you are overconsuming IT resources
Businesses are hungry consumers of IT. Most end-users are not aware of the amount of technology required to support their job function, or for the company to perform its core services. Whether your IT services are performed in-house or outsourced, everything from too many servers and laptops, to underutilised storage capacity and software licenses drives up IT costs.
Do your business unit managers know the level of IT costs being consumed and what is driving these costs? Take the following steps to curb overconsumption of IT resources:
- Use robust tracking tools to monitor IT usage to make IT spending more transparent and easily reportable.
- Reinforce budgetary controls by tightening the purchasing approval process and clarify who has authority to release funds.
- Track actual usage data to rebase the volume assumptions written into outsourcing contracts or agreements with internal IT.
- Centralise procurement of basic IT services that are not strategic to the business to avoid shadow IT.
4. Eliminate redundant IT services and support
The headache of maintaining and upgrading an installed base of IT assets is the biggest barrier to aligning business demand with IT supply. Complexity gets in the way whenever a business requests IT resources to tackle an urgent priority or provide an additional capability quickly.
Eliminating complexity from IT operations often begins by first stripping it out of the business where it is not needed. By subjecting your business’s product and services portfolio to a strenuous cost-benefit analysis you should reveal many potential savings. Enabling your IT team to consolidate platforms and redirect spending to get more out of the smaller IT footprint will also help you become more agile.
5. Keep supply and demand in check
Develop processes that enable IT to match its resources with customers’ most important needs. To prevent the problems of misalignment, overconsumption and complexity from recurring, business leaders need to learn to value IT as a strategic partner.
The partnership needs to be grounded in shared accountability, with senior IT and business executives jointly collaborating in a year-round process to identify the most important business goals. The IT team then decides which IT capabilities the business needs to meet its strategic goals, develops a complete list of priority IT projects and sets a budget.
To monitor demand for IT resources on a day-to-day basis, the leadership team should also task a working group with ensuring financial controls are adhered to, consumption is transparent and that stakeholders have end-to-end visibility into IT spending.
Key questions to consider about IT demand management processes:
- Are there clear procedures and systems in place to govern IT spending, and are they being followed and enforced?
- Do organisational and decision-making accountabilities for IT and the businesses encourage efficient IT use and spending?