How To Mess Up IT Budgeting In 2015 - InformationWeek

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How To Mess Up IT Budgeting In 2015

Two shifts have rocked the IT world: speed and constant upgrades. Factor those in or your budgets won't address reality.

It should be clear by now that massive change has ripped through the world of IT. Those of us who have been through sweeping organizational change projects, like an ERP implementation, understand that it is human nature to pretend that change has not occurred. If we allow that thinking, we're going to mess up a fundamental IT activity: budgeting.

There are two key shifts in the IT world that alter the budgeting landscape. First, businesses have fundamentally and forever changed their expectations for speed of technology deployment.

Second, the operating model for many successful technology suppliers has changed, to focus on recurring revenue.

IT leaders need to help our teams understand why the world isn't shifting back -- and to plan our budgets accordingly.

[Want exclusive survey insight on your CIO peers' 2015 IT budgets? Read IT Hiring, Budgets In 2015: 7 Telling Stats.]

It's impossible to understand entirely why business leaders at this moment in time have a new, faster expectation of IT, but the fact is that they do. Consumerization and cloud certainly have contributed. People don't have to wait six months and file an RFP to get amazing software. It takes a credit card and two minutes. It is what it is.

That speed expectation is true for initial procurement, but it's also true for updates. Those who use technology, both at home and at the office, expect to get the latest, the greatest, and the fastest. Phone lifecycle has contributed to this tremendously. If every year or two you get a startling upgrade to your user experience and design, you start to expect that of all of your technology.

And all of a sudden, that ERP, which wasn't exactly pretty, simple, or intuitive in the first place, starts to look like a pig on roller skates next to that sleek, Jony Ive-designed phone and its super-simple and super-intuitive interface.

Living up to this "it's always beautiful" expectation of technology requires continuous improvement. That means that there must always be continuous investment into product by the manufacturer. It also means that the buyer (you as an iPhone owner, or IT-as-a-business tech owner) will always be spending.

And that leads to my second IT world shift: the change in supplier operating model. The combined expectations of high-speed deployment and "it's always beautiful" constant updates lead to "as-a-service."

There's not a viable technology supplier out there that isn't thinking seriously about ongoing, quarterly revenue. The world of big-bang capital expenditure IT is rapidly drying up. And I would "venture" to say that venture capitalists are turning their noses up at anything that isn't "as-a-service."

This revenue shift isn't about CIO preference. I have done a lot of thinking about this. I've usually preferred in my technology life to make a capital acquisition and then vigorously attack operating costs, thus saving the organization lots of money.

However, that's not going to work anymore. You have to take into account what the dominant supplier business model is going to be, and it will be one of ongoing revenue.

Even if you, like me, find edge cases that still allow for one-time purchases, they will be beaten out of business by suppliers that have superior resourcing -- a.k.a. those that can charge ongoing revenue. As long as buyers prefer "it's always beautiful" and "fast is the default," IT will have to hire software suppliers who require constant resourcing. That's the new budget reality.

Don't like it? As far as I know, that hot tub time machine was just a movie, so going back in time and fixing it is not an option. For those of us who are moving forward, today's reality is unarguably one of constant operational expense. For now, at least, you'll want to adjust your IT budgets to match. It is what it is.

Jonathan Feldman is Chief Information Officer for the City of Asheville, North Carolina, where his business background and work as an InformationWeek columnist have helped him to innovate in government through better practices in business technology, process, and human ... View Full Bio
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Charlie Babcock
Charlie Babcock,
User Rank: Author
1/16/2015 | 3:03:59 PM
Why services? Because on-premises installations become 'legacy systems'
There's a reason why so many things are moving to "as a service" status. A service is centralized and can be frequently updated by its owner. A dozen changes can occur to a service in the time span that it takes to convince an IT manager to make a capital expense. Once the IT manager has made the purchase, the first thing the business want to do is customize what he's purchased. That means it's a struggle for him to update the system, when the vendor gets around to issuing the new version. David Linthicum once remarked to me, when I asked when does a new, on-premises application become a legacy system: "Three minutes after it's installed." These issues don't arise with services, which come from a source under the control of the vendor.
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