Many people suffer from having too much month left at the end of their money.  Corporate IT departments are no different.  There is always more to Empty Pocketsdo than we can afford.  Without resorting to printing money, how can we make the most of what we have?

“There’s this high-priority, unbudgeted project that just came up…”

It’s not an unusual scenario.  An executive approaches you with a new project that just has to be done this year – yet your IT budget is already totally allocated.  You ask what currently planned efforts can be delayed.  Nothing – it all has to be done in addition to this new project.  You might approach other executives to see if anyone is willing to delay one of their projects, but that doesn’t usually meet with much success.  You might review all the IT expenses to see if anything can be cut there, but those were likely cut to the bone years ago.  A final step might be to go back to the original requestor and suggest that you can help if they can find the money for outside resources; otherwise, the project will have to wait until next year.  The meeting doesn’t end well.  The requestor is frustrated and muttering about the IT bureaucracy and your excessive costs.  Moreover, he vows that if he has to spend his own money, he will go outside to find the solution himself rather than waiting on your slow-moving department.

Historical solutions haven’t worked well

IT departments have tried various approaches to address these types of problems.  For example:

  • They may move to a federated or decentralized model only to centralize again years later when they find their IT costs are higher than desired.  This organizational pendulum has swung back and forth for years in search of the one best way.
  • IT might introduce the dreaded G-word – governance – in the form of a centralized steering committee of business executives. They hope this group will assume the ‘bad guy’ role of telling requestors “no”.  But since the committee only addresses large projects, the vast majority of the IT budget doesn’t fall under its purview. Smaller project work then is not diminished.  In fact, it usually increases as people look for ways to work around the steering committee.  And let’s face it – having the decision made by a steering committee doesn’t make people any happier when they cannot get their projects addressed.  While acknowledging the need for some type of governance, people obviously feel that better decisions are made when they are closest to their level.
  • A chargeback model may be implemented to allow the budget process to help in managing demand. While the thought has merit, its implementation often leads to other issues.  For example, some will package the cost of a PC with other costs such as acquisition costs, network connection fees, backup costs, and even management overhead. The resulting comparison of what IT is charging vs. the cost of a PC at the store down the street only fuels the perception that IT’s costs are too high.  This approach can also move IT into a pure supplier role which has the potential for becoming adversarial rather than a mutually-supportive partnership driving the business forward together.

How can corporate IT possibly win?

IT must shift from being supply-driven (totally limited by its budget) to demand-driven.  This requires much more, though, than making some fundamental accounting changes.  This change will touch the very core of your department’s culture and the way you operate.  It will increase your financial stewardship and unleash your entrepreneurial spirit.  And this will help IT to become valued, trusted partners in moving business forward.

  • Establish IT as a business within a business. Move as much of the IT budget as possible back into the hands of the other business units and allow them to decide what they wish to buy.  Instead of being like a kid in a candy store, they now are governed by how much money they have to spend – and how they spend it is totally their choice.  If you don’t have what they want, go get it for them.  If you have something they don’t need, get rid of it.  By implementing simple, easily-understood processes based upon principles of internal market economics, you can remove much of the bureaucracy, rigidity, and complexity that causes so much frustration today.
  • Change your approach. Become a technology enabler rather than a controller – a consultant and advisor rather than a sole-source provider.  Look first to buy and integrate unless there is a significant advantage in building.  Help the business decision makers understand the pros/cons, risks/rewards of each available option…then step out of the way and let them make the decision.  Explore ways to continually improve the speed and flexibility of your company and of IT…and then implement them quickly.
  • Change the conversation. Instead of focusing on costs, turn the conversation to focus on value.  This may mean that you have to help the business unit better understand and articulate the value they anticipate from a project.  Use your knowledge of each business unit’s key metrics to suggest ways in which IT can help them.  Regularly talk with other corporate leaders about what you are seeing in the industry.  Make recommendations to improve customer intimacy and retention.  Identify external data sources that might be combined with your corporate data to enhance knowledge of your customers.  Be sure to educate your C-suite on the potential effects of digital transformation on your industry.  Explore with them ways in which to use digital technologies to break down silos, consolidate processes, integrate your supply chain, and better empower your customers.

The journey to transform IT into a demand-driven services broker will not be easy, but it will position your company to thrive in this world of technology-fueled, customer-led disruption.

What do you think?

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