Can you turn lopsided IT spending (90% maintenance & operations) into balanced, business-driven spending—60% on operations and 40% on innovation?
During any period of economic uncertainty and global disruption, organizations will likely be operating in one or more of three modes: survive, stabilize or thrive.
In survive mode, an organization is focused on putting out fires to protect the business and preserve cash. CIOs will need to take drastic measures to slash costs across the board to stay alive.
Stabilize mode is where an organization focuses on optimizing core systems and applications and restarts derailed plans. In this mode, the CIO is shifting from crisis response to optimizing the must-haves (remote communication, security), and deprioritizing the nice-to-haves (transformation, modernization).
Thrive mode is where a company is focused on accelerating growth.
Along the continuum, organizations could be in multiple stages at the same time—the key is knowing where the organization is now and preparing for what is next.
The power of prioritization
Today, most organizations spend an average of 90% of their IT budget on ongoing maintenance and operations costs. Ideally, the IT budget allocation goal should be to invest 60% in operations and 40% in innovation.
To achieve this rebalancing, IT leaders need to free up people, time and funds to embark on a business-driven roadmap based on business priorities that support the CEO’s goals and vision for the organization. With this proper prioritization of limited resources, the CIO has the power to shift the budget equation and steer the organization into a thriving future.
However, reacting without evaluating the entire picture, could leave the organization bleeding cash. CIOs should be asking tough questions—both of their team and of executives—to be able to face their CEO and Board with a proactive plan of attack. These questions provide a guide for prioritization decisions:
- What will be the organizational impact of this initiative?
- Does this initiative drive competitive advantage and/or business growth?
- Are there more important initiatives to tackle right now to help us right size?
- Can this initiative be deferred?
- Can alternative strategies eliminate the need for this initiative?
As CIOs evaluate the IT initiatives, they need to be ruthless. If it does not increase revenue, decrease costs or gain market share, they should not waste resources on it.
Business-driven prioritization roadmap
As CIOs struggle to find ways to fund operations and growth today, it has become more important than ever that they bring their prioritization superpowers to the table to gain alignment with their CEO.
Using this following framework, CIOs can optimize IT investments and shift more budgets toward following a prioritized business-driven roadmap. This approach can help CIOs narrow their strategic focus and fund what is important:
- Reduce software support and operating costs
Use third-party support and AMS providers to reduce support costs. Avoid or delay expensive, low-value application upgrades. By replacing overpriced vendor support, organizations can dramatically cut costs and reallocate funds to strategic initiatives.
- Improve application management outcomes
Take a unified approach to application management and support, consolidating providers and reducing complexity. With a single-provider source, CIOs can reduce operational disruptions, finger pointing, and support gaps between vendors.
- Leverage public cloud
CIOs generally should not be in the data center business. Instead of managing infrastructure, CIOs should focus resources on business value, not operations. Employing a pure public cloud or hybrid model can help them achieve strategic flexibility, avoid vendor lock-in and take control of their IT roadmap based on the business objectives of the organization.
- Manage public cloud usage
Once the infrastructure is on the Cloud, do not treat it as just another data center. Concentrate on continually improving performance, scalability and security using cloud-native tools to drive down spend and extend functionality.
- Optimize software licenses
To improve ROI and reduce risk, review software licenses for underutilization and compliance. By avoiding potential compliance issues and optimizing license positions, CIOs can get more value out of vendor agreements, be better prepared for audits and help avoid hefty penalties.
Employing these strategies now will help CIOs to proactively manage volatile conditions and emerge stronger.