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9/27/2007
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IT Survival Guide: The Art Of IT Spending

Business alignment, ROI, and careful vetting are the keys to success.

It's that time again: IT budgeting season for next year. You're likely receiving requests for IT funding from across the company, and you need to figure out which proposals to support with limited dollars. You must set priorities and evaluate requests fairly and effectively, while setting a good chunk aside for ongoing support costs.

Above all, make sure the IT budget and the projects dependent on it are in line with your company's business objectives. "You've got to make sure the budget is consistent with organizational goals," says Mike Jones, corporate VP and CIO at Children's Hospital and Health Systems in Milwaukee.

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Departments vying for IT dollars need to show how their projects translate into business value and ROI. Your job: Weed through the requests to select those most important and, ultimately, most feasible.

At Children's Hospital, requests are evaluated using a point system that assigns value based on the number of people positively affected by a project. So a request for an application that promises to improve the admissions process would likely get a high score because thousands of patients stand to benefit.

Be creative. Even though now's the time to vet requests for next year's IT budget, contingency funds from the current year might be used to jump start worthwhile endeavors proposed for the next fiscal year. A contingency budget, says Jones, provides flexibility.

And don't forget the must-haves in all IT budgets -- new PCs, infrastructure, storage, and "keeping the lights on." Such nondiscretionary items are "not up for voting," says Jones.

One way to stretch the budget is to apply technology to create new efficiencies. It's not easy, but try turning your data center into a virtual money machine. Virtualization and server consolidation, for instance, may make it more affordable to deploy a new business application without buying new hardware.

When approving a project, it's important to be realistic about the scope of the work involved. If you underestimate or requirements change, says Jones, "you'll end up having to take money from somewhere else later."

Think carefully about the staying power of projects under consideration, advises Stephen Pickett, president of the SIM Foundation and CIO at Penske. Also, get bids from vendors on systems and services that you plan to purchase. It's time consuming, but the bidding process has benefits: "Money will drop out of the bottom line," says Pickett.

A CIO's ability to get IT funding can be a reflection of his or her credibility in the organization. "Being business savvy, being a respected leader, having a good relationship with the comptroller's office are all key," Pickett says. Respect is earned through effective management of the company's money. "You need to build confidence for getting things done and not embellishing," he says.

Of course, that's a shared responsibility. CIOs should insist that department and business unit managers are equally committed to responsible IT spending. "If you don't have an executive sponsor, I won't sponsor it either," says Children's Hospital's Jones. "We both have to be accountable."

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