Editor's Note: Welcome to SmartAdvice, a weekly column by The Advisory Council (TAC), an advisory service firm. The feature answers three questions of core interest to you, ranging from leadership advice to enterprise strategies to how to deal with vendors. Submit questions directly to [email protected]
Question A: How should we justify our IT budget in an "IT as cost center" enterprise culture?
Our advice: Let's face it. An IT organization that has to justify its budget as a "cost center" has lost the respect of the business (or never had it).
Since the business is viewing every dollar spent on IT as one it could save, the imperative for IT is to demonstrate the value lost if the IT budget is cut. By showing the business that the IT organization's goals and objectives are aligned with their own, the resulting goodwill will help mend some of the broken bridges.
To rebuild business confidence in IT, start by eliminating budget items on your own. You know where the expendable items are in your budget. By cutting these yourself, you help establish your credibility with senior management.
Now, you're ready to work on a budget that has a chance of being funded by the business.
Start by splitting the budget items, or initiatives, into areas enabling:
The presentation of a message is as important as its content. Start the meeting by showing progress on the cost front:
Be ready to respond to the following questions, or better yet, introduce them head-on in your discussions
Be firm on items you must have funded, but support your point with business-value analysis, not a "trust me" statement of "fact." More important, be open to eliminate items that don't address a clear business need.
Remember, this year's budget always sets the stage for the next one. The carryover isn't dollars, but confidence and trust--neither is a replenishable commodity.
Our advice: Compliance with legislation such as Sarbanes-Oxley, Health Insurance Portability and Accountability Act, and Gramm-Leach-Bliley has forced enterprises to address the archiving of E-mail and other electronic messages. This is complicated by the need to integrate with enterprise applications such as CRM and ERP systems, and by the rapid growth in both the volume and variety of electronic messages.
Fortunately, message-archiving software has matured to meet the challenge. These systems:
Message-management systems are stabilizing, but still evolving. This evolution makes evaluating vendor offerings both easier and more difficult. Easier, in that some offerings clearly won't meet objective requirements, such as support for certain E-mail servers. More difficult, in that subjective evaluation becomes critically important. Regulation and technology trends, and the vendors' vision, direction, focus, and alignment with archiving needs, have a great impact on evaluations.
Here's a road map for implementing appropriate systems to enforce message-archiving policies:
Our advice: Today, high user satisfaction, low-cost operations, and measurable business-value creation are table stakes. In this era of rising expectations, new IT strategies and management methods are required. IT managers must think and manage the same way that general managers do. General managers use a three-stage strategy to leverage their assets and grow their businesses.
To succeed in this new environment, IT organizations must develop strategies to leverage their time and talent. The key is IT asset management. The first step is isolating IT assets that can be redeployed to deliver results faster and cheaper than "green field" alternatives. The second step is refining IT management processes so that building and leveraging IT assets becomes standard operating procedure. The final step is aggressively leveraging the company's IT assets to create value.
Identifying Business-Technology Assets
Since every IT application has its champions, how can an IT organization identify the few applications that should serve as the asset base for future efforts? In years of field work, I've found that the following criteria are a good starting point:
Business strategy -- Does performance of the IT asset directly affect strategic goals? For Wal-Mart, the efficiency of its logistics process created a 2% operating-margin advantage against Kmart and Sears during the early 1990s.
Core operating process -- What percent of business volume touches the IT asset? In the early 1990's, virtually every reservation American Airlines took was processed through Sabre.
Cost to operate (business) -- Applications that can reduce cost of operation far below competitors are strategic IT assets--for example, FedEx.com in the mid-1990s.
Adherence to technology standards -- If the company's technical future is Java, question whether Cobol applications should continue to be viewed as assets.
Cycle-time to adapt -- If technology can't change as fast as the business, new IT assets must be created.
The key to leveraging business-technology assets is to get business peers to think about IT assets the same way they think about plant and equipment assets, product assets, or brand assets. Most business assets aren't infinitely malleable. Unfortunately, since most CIOs don't talk about their IT capabilities in asset terms, they frequently set themselves up for unrealistic business expectations. The business needs to understand what types of initiatives are easy, and what ones are difficult because of the existing IT asset base. Getting the business to understand your IT assets is an education process. Once understanding is reached, it's much easier to conceive future business IT initiatives in synergistic ways. Synergy and leverage are the keys to consistently exceeding business customer expectations.
-- Walt DuLaney
Sourabh Hajela, TAC Expert, has more than 15 years of experience in strategy, planning, and delivery of IT capability to maximize shareholder value for corporations in major industries across North America, Europe, and Asia. He is a member of the faculty at the University of Phoenix, where he teaches courses in strategy, marketing, E-business, and leadership. Most recently, he was VP and the head of E-business with Prudential Financial.
Peter Sorrentino, TAC Expert, has more than 20 years experience in consulting and software development, with extensive experience in the high-technology and financial industries: trading, cash management and risk management. His specialties include development of business-differentiating software systems and providing consulting to IT organizations with an emphasis on applications. Consulting expertise includes joint business/IT evaluation of software vendor offerings and business-service platforms, application architecture, and development of best practices in support of real-time business opportunities.
Walt DuLaney, TAC Thought Leader, is an authority on the planning, design, and management of strategic business and technology initiatives. He consults extensively on strategy-alignment, project-management, and performance-measurement methods to assure that strategic initiatives are delivered successfully and operating results are verifiably improved. He is also the chairman of an RFID software-services company.