Budget pressure. It’s always on to reduce IT expense and to be simultaneously more productive. For most of us budgets have all the appeal of a tooth extraction. But we also know that solid budget creation and management is how we get where we want to be. Creativity helps. It’s imagination in blending numbers with desired outcomes. Finding adequate time to do it is always a strain but the payback is more than time and money. It’s success.
Our observation is that lots of organizations still start with what they already do. That is, “how is the budget allocated now?” “How much if any can be added to it?” “Where could we cut?” Of course the issue with this approach is that it runs the risk of treating IT only as a cost center and follower of status quo. But that’s no longer an effective way to function – if it ever was.
The clients we see as most successful certainly look at current spending. However, that’s their starting point for evaluation of what isn’t being done that should be – and what is that shouldn’t. Then there are the larger and more strategic ideas. This is where IT is seen not as a cost center but as a value generator, an enabler of revenue.
Some take the view that IT can lead the business. They present Information Technology as part of the critical core. Enabler of progress. More CIOs are looking to demonstrate that IT creates value, knowledge and productivity. They see it as the essential edge of competitive strength. Mobility is also a big part of that consideration. That’s their essential means to reach clients wherever they are. They want clients to be able to securely transact business, to instantly access information and to create new business possibilities beyond any geographic constraint. That’s way more than a cost center.
However, we know gaining that business technology edge, and then keeping it, is a major challenge. It isn’t simple. And it will cost time and resources. Back to budgets.
Gartner has a few budgeting tips to start with. They agree that analysis should first “Follow the money.” That’s not just looking to where spending flows today but where the flow should be stopped. What may be surprising is that after data center costs – 23% for servers, storage, networks, space etc. – the largest costs on average are for application development (18%) and application support (16%). So, applications take more than a third of the average IT spend and are “one of the richest areas to mine” to improve budget management.
And there’s more to it. In fact, extraordinary impacts on application development have become one of our most frequent and fruitful topics. It’s where we have helped nearly every customer to an aha! moment.
We’ll come back to this.
Another surprise about application spend is the difference in price performance between average and best performing organizations. It ranges as high as 52%. Which means the largest portion of IT cost has a huge gap between average and best. It’s also arguably the most important to optimize for increased revenue.
We hear of two other prevailing budget headaches in nearly every customer exchange. “What should be our top priorities for new projects and spending?” And “What will surprise us?” Sometimes these are rhetorical questions. But we do have some suggestions, starting with a close look to confirm they are fully optimized for data protection.
A few key items consistently emerge:
Is business resilience secure?
- Backup and restore systems
- Disaster recovery capabilities confidently in place
- Business continuity and high availability certain
Can related benefits be clearly demonstrated?
- Reduced / eliminated costs of downtime
- Lower CapEx and OpEx
- Lower operating costs
Customers want to be satisfied that all of these elements are firmly in place and if not, that’s where budget talks are likely to start. If all are secure, the conversation advances to creation of new business value and gets back to the app development discussion, and the search for more aha moments!