At many companies, IT budgets are being trimmed. IT decision makers faced with financial cutbacks tell us they’re concerned about maintaining service levels, their 2020 projects, and aligning their organizations with 2021’s business objectives.
However, a smaller budget alone is not necessarily a problem for IT. Even with budget adjustments, it’s still possible to meet customer expectations and uphold the integrity of solutions. The larger problem is when organizations haven’t allocated budget to support IT innovation in the first place. As a result, they wind up with duplicate or inefficient investments that don’t fulfill key business outcomes.
If your 2020 IT budget is in flux, you have a valuable opportunity at hand. Here’s how IT leaders can take a hard look at digital spend to optimize innovation initiatives and stay within fluid budget constraints.
1. Identify goals for your business
The first step for IT leaders tasked with a budget restructuring is to identify the business outcomes they need to achieve through digital initiatives. A smaller budget doesn’t mean you’ll need to take existing goals off the table. However, you may have to rethink your timing and your approach.
Digital initiatives deliver financial, operational, and strategic benefits, and often they are closely connected. Each outcome should be tied to measurable returns for all stakeholders, such as revenue generation, customers gained, customers retained, or even time saved in managing core operations like IT security.
For example, you may have three desired outcomes of a cloud transformation:
- Financial: Reduce overall IT spend.
- Operational: Streamline cloud and IT system management to free up resources for additional projects.
- Strategic: Introduce new digital experiences to improve overall customer experience and boost customer acquisition and retention.
To set yourself up for success, be sure to define any and all terms involved in your outcomes with your colleagues. For example, “Cloud” can mean many things to different people, so it’s important to agree on what it is you’re trying to achieve.
2. Align objectives with finance
Even if the budget cut is sizable, don’t panic. Many times, we see budget decreases are able to be accounted for by optimizing the existing environments. These aren’t easy questions to ask or answer, but they are addressable.
Transparency between finance and IT is vital at all times, and especially when your budgets and projects are being re-evaluated. You’re going to need to have tough conversations with your finance team about how to proceed with IT spend as it relates to achieving the company’s stated business objectives.
Before you begin to invest in new solutions or eliminate old ones, discuss what the overall organizational budget changes will be and how it will impact your ITs budget (for example, a $1 million budget shrinks to $750,000).
Once you’re clear on changes to budgets and objectives, you’ll need to present finance and business stakeholders with a comprehensive view of your existing application, data and infrastructure portfolios. It is not uncommon for many digital innovation initiatives to be greenlit because they sounded good on paper.
Now, when resources are being re-evaluated, there must be strategic discussions between IT and finance about how each solution can tactically support a business outcome. If the initiative doesn’t directly support a critical initiative, you can reclaim budget and resources to allocate where they are needed.
Finally, set up a new process for IT and finance to vet new solutions and restructure old ones. This way, there will be improved alignment between future budget decisions and IT resources.
3. Investigate which solutions are working and which are not
After you’ve met with finance, you’ll need to take a current inventory and find out what's worth retaining.
Ask yourself these questions:
- Is this service or solution still being used for a relevant business objective?
- Is this service or solution serving another critical function for our business?
- Are there multiple services or solutions that accomplish the same thing?
Sometimes, the justification for purchasing an unproductive solution might be something along the lines of, “everyone else was investing in this, so it seemed like we had to,” or “having this prestigious application is good for our reputation.” While optics can be seductive, the true indicators of the value of any investment should always be functionality, scalability, and profitability.
Look to eliminate or update duplicate platforms, outdated legacy systems, and non-regulated systems, all of which too often drain IT budgets. If revenue growth is important to your business, then scalability of a platform is essential, but legacy systems often aren’t fluid enough to sufficiently adapt to increased data volumes and operational changes.
In assessing what stays, what goes, and what changes, we often find that companies have ample opportunities to reduce spend, free up resources and simplify their day-to-day operations. It was just a matter of taking the time to do a deep dive into the current operating environment.
4. Be prepared to restructure your spend to meet objectives.
Reducing or eliminating spend in one area may free up budget for investment in a new solution better suited to meet today’s needs or accomplish your near-term business objectives.
Thoroughly vet all current and potential new solutions for alignment with your business’ desired outcomes. These, too, are difficult discussions, but you need to have them. For instance, if your objective is to increase efficiency and cost savings of your cloud provider, you need to weigh the cost of each provider you’re considering against industry insights about how each can meet your financial, operational and strategic objectives.
Once you’ve made a decision about new investments or renewals, plan to present your research and reasoning for new solutions to the finance and business stakeholders. Including all constituents in this discussion will not only keep objectives in alignment, it will help the entire organization see and understand what is necessary to achieve success.
5. Make smarter investments for higher returns
Don’t think of a budget cut as a hole in the balloon of IT innovation. Think of it as a prompt to make your IT operations leaner and more effective.
The time and money invested in a detailed assessment of your current environment -- and its alignment with your objectives -- will more than pay for itself.
Challenging times and market conditions are occasions for IT leaders to shine. Seize this moment to conduct comprehensive reevaluations and revisions to existing objectives, processes, and financial constraints.
Tom Kiblin is the vice president of managed services at ServerCentral Turing Group (SCTG). SCTG offers cloud-native software development, AWS consulting, cloud infrastructure, and global data center services.