According to the Brookings Institute, the digital economy is growing 2.5 times faster than global GDP in 21st century. In the same article, a Deloitte survey is referenced, whereby companies who have 75% or more of their IT in various “as a Service” (Software, Infrastructure, Platform) models have moved from “reducing costs” to “accelerating innovation.”
The right investment in IT should lead to innovation and growth. Budget season, with its long meetings and complex spreadsheets is an opportunity for IT leaders (CIOs, CDOs, et al) to rise above the pivot tables and influence investments.
Q1: How much money/what percentage can we cut from the IT budget?
A1: There is too much talk about money and not enough about time. There may be more or less money available for the next 365 days, but there will never be more than 365 (or 366) days to spend it in. Time is not a renewable or expandable commodity – it needs to be invested even more carefully than money. Try to inject questions such as….
- How do we want to spend the valuable time of our personnel in the next year?
- What are the top business goals in which we want to engage our people’s time?
- What are the concerns with time-to-market, value received, or other past IT performance measures, and how can we apply our time & talent to improving those measures?
As you are starting the dialog, consider what you want as an end result – the asker and yourself being aligned on how you are going to work together to establish the right technology money and time investments for the next year. (Note: A colleague of mine used to call these “educational moments” – make sure you educate yourself by being curious and open-minded.)
Q2: Can we reduce personnel costs by outsourcing?
A2: An unequivocal “maybe.” If the product or services targeted for outsourcing are not working now, they could be more expensive and less performant. If a product or service is under-whelming and/or under-funded when it is in-house, the only value of shifting it elsewhere is an outside entity to blame. A dog that barks won’t stop making noise when it is in someone else’s yard – unless it has been trained not to bark first.
Outsourcing opportunities should be assessed and prioritized like everything else – if asked this question, again look for the motivation. The initial driver should not be cost reduction. The right question is “could a vendor for whom this is a core competency do this better?” where “better” means delivering an improved experience.
Q3: Cut X% of the budget.
A3: Wait, isn’t this question 1? No. There is a huge difference between being asked what could be cut, which opens the door to dialog, and being told what to cut, which indicates a decision has been made and you’re being told to execute. First and bluntly, if CIO/CDO is being told to cut and wasn’t part of the conversation that led to the decision, start looking for another job. Second, if you are in the hiring process for a new CIO job, and the CEO/CFO/Board is saying a top priority is to cut IT budget, you should seriously ask yourself if you are suited to the tasks of reducing rather than innovation & growth.
IT investments should be perceived as an engine for sustainable growth of the business, not a cost center targeted for reduction. There are really only 2 reasons for cuts – business results aren’t being achieved ergo there is less money available, or value is not being realized by the internal customers and they want to divert funds elsewhere.
Q4: What’s the ROI on this multi-million dollar IT investment?
A4: There’s a reason that there’s an “I” in ROI. Because ROI is in the eye of the beholder. Investment in IT needs to lead to a measurable business result. Let’s parse that.
- Measurable: What’s the measure, what’s the source of the data for the measure, what’s the formula for the measure, who’s accountable for producing the measure, to whom and how frequently.
- Business: There are no solely IT measures, there are only business measures. Reduction in business cybersecurity risk. Elimination of waste in a business supply chain. Lower rate of business talent turnover. Higher reliability of the business network.
- Result: When will the results start to happen? Can we phase the investment so some results are seen as soon as possible? Is this result as desirable as other potential investments?
Q5: What are the most important projects?
A5: Only the top 3-5 that will produce the best & fastest measurable business results that can be funded and resourced, and no other projects should be undertaken. Period. It is better to get a few projects done and producing business results than try to do 50 and get none of them done. (See Q&A #1 re: time.) Spreading the peanut butter gives everyone a tiny bit of peanut butter and leaves everyone hungry.
IT leaders should go into budget season with statistics on past years’ projects with a strong focus on what was planned vs. delivered.
Turn the drudgery of budget season into an opportunity for dialog and educational moments, with a focus on ensuring time gets equal consideration with money.
Was impressed to learn that my power company has a female CIO. (Though I do yearn for the day when this is just run-of-the-mill.) Check out this article and video of Kathy Kountze, CIO at Eversource.
Flex work arrangements are the new normal. Up to 90% of the workforce desires a couple of days per week of telework, and this is just one of the data points in this Inc article linking flex work arrangements and the ability to attract and retain talent.