That split isn't bad, says Gary Curtis, global managing director of Accenture's strategic IT effectiveness practice. The old rule of thumb was that 80% of IT spending went toward ongoing costs and 20% toward new investment. The sweet spot today is to spend at least 40% of IT budgets on discretionary expenses, such as new endeavors, and less than 60% on nondiscretionary expenses, like maintenance.
Bank of America got to that sweet spot through a focused effort to automate and off-load routine tasks. That freed staffers to try new technology and develop a more business-centric culture, says Brian Kale, senior VP of integration, support, and analytics. "There was a time not long ago when tech people walked around in lab coats," he says. "But with so much plug-and-play technology today, you don't need scientists, you need people who can talk business."
Software has become more stable, automated monitoring is built into many systems, and standardization has simplified support, he says. All of this cuts back on the day-to-day housekeeping, letting Kale's people spend 70% to 80% of their time on new development.
That kind of success feeds on itself. For example, Kale's group recently developed an app that tracks and monitors systems' performance, reporting problems and escalating them based on severity. Deploying it freed Kale's team to spend five months developing an automated back-office accounting system that supports conversions of systems from credit card company MBNA, which Bank of America acquired. Without the app for monitoring system performance, Kale would have had to hire 90 full-time employees to do the back-office accounting processes manually, he estimates.
Reebok, too, is experiencing a favorable shift in the maintenance vs. innovation equation. Over the last three years, Rammel's group went from devoting 75% of its time plugging holes and fighting fires to now spending 65% of its time on new technology ideas, he says. One positive outcome of this and other shifts in Reebok's IT group is that some of the changes are rubbing off on the operations and business people, Rammel says. Non-IT related projects are now being managed more like IT projects, at "a new level of structure, organization, planning, and strategy," he says.
FAR FROM THE EDGE
Not all companies are shifting their budgets or staff time that aggressively toward new development. WorkingRX, a midsize company that provides financial services to pharmacies, has a typical play-it-safe, conservative culture. While the company spends half its IT budget on new projects, it tends to use proven technologies. "We're very pragmatic and low risk," says CIO Jay Foster. "I'll let someone else be bleeding edge. We'll wait till someone else takes it and breaks it; we'll use it when the bugs are worked out."
One interesting twist: While that conservative mentality will likely continue at WorkingRX, the IT staff is being pushed hard to work more closely with business staff on ideas to improve the business. The two groups began meeting regularly over the past year to talk about how technology can meet the needs of the company. The business side also is learning more about the limitations of technology. And both groups have been trained in better ways to communicate.
That's resulted in a complete change in attitude. In the past, "IT people were order-takers who went back into their dungeons to code," Foster says, and now there's a lot more collaboration. The changes have resulted in a new project management office and a new openness to outsourcing, of which the company's done little to date, says Foster.
WorkingRX's conservative approach to technology adoption puts it at risk of lagging behind or missing out on innovation, but it's the way many companies are operating. More communication and collaboration between IT and business may push the company out of the conservative mold over time. It's an approach IT groups should consider as they look for ways to take more chances and make a difference in their companies.
Report: CIO Agenda: Culture