When Cost Is Your Only IT Metric, Everyone Suffers

by Craig Symons

Craigsymons_2In the current economic climate it’s not a surprise that many of the conversations I have with clients tend to revolve around IT budgets, the cost of IT, and what if anything can be done about it. 

Unfortunately, for many IT organizations, cost is the only metric they have that their customers understand.  And so it is the one that gets most of the attention. These conversations with clients usually take one of two directions.  The first one focuses on how IT can cut costs quickly and effectively without “throwing the baby out with the bath water” so to speak.  This is the realist’s approach.  The second one is a plea for help in justifying the existing or planned budget to business executives.  This is the idealist’s approach.  More often than not the end result is the same - IT budgets are cut without regard to impact on the business and everyone suffers. 

But it doesn’t have to be this way.  One CIO that I know rarely talks about IT costs with his business counterparts, instead he talks about the value that IT brings to their organizations and how spending more money on IT can help the business better cope with the current environment.  These discussions are taking place because of the trust that exists between IT and the business, trust that has developed over time as a result of a number of initiatives put in place by the CIO that provides complete transparency into IT’s costs and operations and enables his business customers to link IT services and capabilities to business capabilities and their impact on business outcomes.  These initiatives included:

A service catalog that defines IT capabilities.  Do you have an online service catalog that defines the products and services available, their cost, and the guaranteed service levels?  Are they IT-enabled business services that your customers understand and are easy for them to link the cost of the service to its value?  Do IT account managers regularly meet with their business customers to help them get the most from their IT spend, ensure that they are satisfied with their service levels, and help them plan their future demand? 

A business driven portfolio management process.  Are all new requests for IT investments subject to a standard investment process?  Do you have a business case template that includes costs, benefits, and risks measured in a consistent way?  Do each of the proposals have a business sponsor that is accountable for the results?  Are the funding and prioritization decisions being made by the business?

An engaged executive management team.  The CIO reports directly to the CEO and is part of the executive management team.  He confers regularly in formal as well as informal sessions with his peers and meets with the board of directors on a quarterly basis to discuss IT strategy and its role in business strategy.

When clear linkages can be made between IT capabilities and business capabilities that influence business outcomes rational IT investment decisions can be made driven by benefits, not costs.  Discussions can be focused on how to adjust the portfolio to ensure that it maximizes the return in light of changing and challenging economic conditions. When this happens everyone wins.

So what do you think?  Are you winning or losing your budget battles?

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