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IT Leadership // CIO Insights & Innovation

5 Reasons You Blew Your IT Budget

CIOs constantly struggle to keep IT spending under control. Consider these common reasons for budget overruns, along with some potential solutions.

First, the good news: If you work in the IT department at an insurance company, your budget isn't likely to fall this year. Research from analyst firms including Novarica and Strategy Meets Action--not to mention a couple of late-year polls conducted by Insurance & Technology--indicates that many insurance companies plan to invest more dollars in their technology departments in 2012 than in 2011, and a majority of carriers are at least holding their budgets flat.

The bad news? More money might mean more headaches for insurance IT organizations, as business pressures will require them to stretch every dollar to its limit. "There's a lot of pent-up demand [for new capabilities], but there are also things in the background that have been put off," said Jeff Muscarella, EVP of IT at NPI, an Atlanta-based IT spend management consulting firm. "So even though budgets have gone up, there's pressure for them to go even higher."

Keeping IT spending under control is a constant struggle for CIOs. But it's not an impossible task. Here are some of the most common reasons for budget overruns, along with some potential solutions.

1. Ineffective Communication During The Budgeting Process
A common reason for tension in any group, whether it's a multimillion-dollar company or a family, is an inability to effectively communicate desires and boundaries. True to life, a barrier to clearly delineated goals at insurance companies, according to Greenwich, Conn.-based IT consultant Joel Collamer, is simply language.

"The tech world uses very different words than businesspeople use," he said. "You can have a sentence that means one thing to technologists and something totally different to the business side."

Jeff Palm, CIO of Minneapolis-based Allianz Life, a subsidiary of global insurer Allianz SE (Munich; US$129.9 billion in annual revenue), said there are some executives within his company who are more tech-savvy than others and who will describe the systems that they want, right down to how they want the interface to look and which data elements they want included. But, he added, he works within a system that facilitates development of solutions described by less technologically inclined peers as well.

Read the rest of this article on Insurance & Technology.

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User Rank: Apprentice
2/22/2012 | 4:36:06 PM
re: 5 Reasons You Blew Your IT Budget
I really would have liked to blow my IT budget on fancy espresso machines and a fleet of segways to shuttle me from my desk to those espresso machines. Sadly, that will never come to pass.

All joking aside, the push for new capabilities - or the delivery of existing capabilities in new ways - is certainly one of the biggest drains on IT budgets that I've seen especially in the last 5 years or so. I think you really hit the nail on the head there.

I've often wondered, though, about the virtue in sometimes allowing your IT budget to lash out seemingly uncontrollably. While keeping such things leashed in is most often the wisest decision, sometimes you have to go for broke before you can realize true innovation. The key is balancing it all. Balancing your ability to deliver new and desired capabilities in a cost conscious manner and to sieze opportunity for innovation and constructive change in directions and ways that the business would not normally be able to conceive of.

Great article! Thank you for sharing it with us.
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