IT budgeting – Greater than the sum of all parts

MODERN ENTERPRISE IT is a complex beast – an intricate mix of on-premise, cloud services and technology suppliers – turning IT billing into a lengthy and confusing process. This makes it difficult to answer the simple questions – How much more does one employee cost me? How can I get the most out of what I have?

With many companies desperate to acquire staff with the latest skills in order to set them apart, there is increased pressure to deliver new IT capabilities and buy into the latest buzzwords such as ‘big data’ and ‘bring-your-own-device’. Many IT departments are left juggling a mix of in-house, outsourced and hosted solutions. What does this all mean for the bottom line? If I increase my staff by 30% will my IT spend increase by 30%? These questions are not easy to answer.

Which costs to cut?
Growing or shrinking your workforce will have an impact on your costs though not always in the way you would expect. Traditionally it has been easier to alter your variable costs, such as mobile devices, hosting or software, often meaning fixed costs are ignored or written off as a lost expense.

However this is no longer the case, fixed costs like servers and network devices are fast being made redundant by the cloud. Hiring more staff can pose a huge expense to the business and place increased strain on on-premise hardware – directly impacting on the bottom line and ultimately affecting plans for growth. Losing some variable costs will not always deliver the expected savings – laying off staff does not automatically shrink your enterprise license fees.

Add to this the headache of managing the moving pieces of modern IT systems and you can begin to understand the challenges CIOs face. How much did we spend last month on Amazon web services and does the cost match usage? What were our consulting fees to outsourcers and what benefits did they bring? Which items can IT cut if the budget is reduced?

Plan Ahead
Just as businesses plan for the future, rather than just the present, so must IT, evolving from simply “keeping the lights on” and instead become a strategic asset to the company.

To do this the CIO needs a fully transparent bill of IT, enabling them to plan IT spend in line with the company’s road map and bring value back to the business rather than simply being a drain on resources. A mature and open conversation between the IT and Finance functions is essential – something we often see merging into a new discipline of “Technology Business Management”. This bill of IT will also help the CIO predict the impact of growing or shrinking the business, as well as the impact of a merger or acquisition and even the price of moving off expensive or outdated hardware.

Rather than appear as an unexplained and rarely changing figure on a company’s financials technology has to become a key part of business decisions and future strategy.

Colin Rowland, is vice-president EMEA at Apptio