IT Investments and Spending More

February 5, 2018
Dave Brady

In today’s business world, no matter your industry or market, technology has an ever-increasing role to play. Business, always looking to grow revenues and increase profits, is more reliant on technology to make that happen than ever before. And this trend is not going away. Against that backdrop, IT agendas and organizations continue to be a constrained resource in terms of both human and financial capital. This chasm between growing business appetites for new technology and constrained IT capability begs attention. This is a very serious point of frustration that resonates from the board room to the market place.

There are two options any company has to bridge this chasm, spend more, or spend smarter. Today I will review spend more.

Spending above current investment levels is difficult for most companies. Working capital is constrained, normally with too many competing priorities across the company. Operating budgets are fixed and it’s incumbent upon managers to achieve plan for the overall financial health of the company. So, if technology seeks a bigger portion of either, it needs to be worthwhile to the overall company because something else must give. And for this, the business case is your best tool.

No one likes unplanned expenditure and investment requests, but they do occur. As the IT leader, your job is to make sure such requests are firmly grounded in a solid business case that aligns with what matters most to your organization.

First off, a good business case starts with the background. What business opportunity is at hand? What business issue requires solving? Why does it matter to the company? Next, outline options that avail themselves to address the matter, including a “do nothing” option as the baseline. Articulate the pros and cons of each option. Once the options are clearly outlined, recommend one and show how it addresses the matter at hand better than the others. Include an execution plan for the recommendation detailing scope, schedule, resources, and budget. Lastly, outline a multiyear Pro-forma capital and expense investment showing the total cost of ownership (TCO), net of any margin improvement. Show future budget impact, with upgrade and support costs, to show a complete picture with a supportable solution.

Business cases should be focused around one or more of these five drivers.

  1. Grow revenue
  2. Increase margins
  3. Address pressing customer service matter
  4. Address product and or service quality matter
  5. Address unplanned regulatory and/or compliance matters

Note: Many companies have internal hurdle rates for new investments; required internal rate of return. Factor this along with ROI as necessary.

Though a business case will not guarantee a new funding request gets approved, it certainly helps. A solid business case will clearly outline the business opportunity at hand, in a business context, so the merits of the request can quickly be weighed against other priorities and forecasted business conditions. Your executives will appreciate this approach anytime you seek to spend more.

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