Protecting your IT budget

Protecting your IT budget - a CTO’s guide 

So how do we guard against these challenges, whilst ensuring your budget next year allows you to deliver what you need?

 Here we broach into some IT Financial Management and Technology Business Management basics, that whilst not always that easy to do, give really good insights and weight to conversations you may have with executives:

Understand costs of service vs demand across the organisation

 Understanding what technology is used by who and having an idea of what costs are applied across what technologies so you can start to show (even if using lots of assumptions) why costs are the way they are and who in the organisation is the main consumer can be really powerful. For example, the cost of an application only used by one department might have a swathe of people from IT supporting it, the cost of the licences to the supplier, additional support service costs from the supplier, 3rd party outside consultancy costs, hosting costs etc etc that are associated with that one app that comes out if IT's budget. Being able to aggregate these costs together, apply a ratio of how many people are using it and then looking at the effort / time it saves or the outcome it provides to the organisation could provide a reality check as to the value of the application in use that sets a decision path to a greater value option that could strategically be put in place.

Understand cost of IT service vs service satisfaction

This is useful when trying to measure the value of IT services provided, comparing cost of service with the satisfaction feedback that consumers are providing. For example, looking at desktop services, asking for feedback around the support they receive, the devices they receive, the ability to connect to the applications through WiFi, the ability to find a desk / seat and "plug in" all contribute to the satisfaction of the desktop service that an organisation offers it's consumers. Tracking this satisfaction against the costs of the service can be useful but it's the more detailed insights that provide more use such as comparing feedback per department against the costs of the kit they receive or the location worked in. These more detailed insights intend to drive out decisions on investing in newer technologies, different types of technologies or upgrading things like WiFi.

 However, this means tracking spend of IT against a standard data taxonomy and aligning that taxonomy in such a way that it takes into account IT operations, IT change and the organisation use of IT. CoPerceptuo helps with this, providing this taxonomy on which to understand aspects of TBM and ITFM outlined above.

 Know your spend metrics

 From a recent survey by Flexera, the spend on IT versus revenue across Europe is 10%, slightly behind 13% of revenue in North America. However, we work with clients where 2% to 3% of revenue is the norm and IT teams are completely under valued. This is something that can be measured fairly easily also i.e. IT staff costs + 3rd party spend + overheads (like electricity, floor space etc) = TCO which can then be divided by revenue to give this percentage. Make assumptions if elements of this equation are ropey but it's a good exercise to do if you're not doing this already.

Be able to articulate complexity

Not always, but most of the time, complexity equals more cost to serve consumers and run IT. Complexity is not always the result of IT's capability to manage either, often we find this to be misunderstanding (or mismanaged) communication between IT and the organisation as to who decides what, who supports what and for what budget. Having a string handle on complexity and why, gives weight in conversations to reduce complexity, therefore likely reducing cost and probably increasing value for money in the process. 

Spend metrics can be found from a number of benchmarking organisations such as Forester, Gartner, Flexera and others. These tend to be more anecdotal so revising these down by 1 or 2 points is probably a more realistic representation, but useful nonetheless as a data point. 

Being able to articulate complexity can only really be done through a thorough understanding of the estate you're managing and the outcomes they provide for the organisation. 

You do need to pick your battles though. For example, an exec is not going to be particularly sympathetic to you moaning about complexity if it's around a system that is the main driver of revenue but if you can articulate how this impacts on costs and improve profit overall some other way whilst strategically increasing the efficiency of IT / the organisation, you're more likely to win the argument.