IT Investments and Spending Smarter

January 25, 2018
Dave Brady

No matter your industry or market, technology has an ever-increasing role to play in today's business world. 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 for both human and financial capital. This chasm between growing business appetites for new technology and constrained IT capability begs attention. This is a severe 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 smarter using an IT 70/20/10 budget principle as a guidepost.

Rooted in the heart of spending smarter is the ongoing investment level required to support every company’s technology debt. This is where the IT 70/20/10 principle is useful and why IT management needs to focus more on it. While percentages change from company to company, the principle is relevant for any business.

IT 70/20/10 Budget Principle

70% of a typical budget is consumed maintaining the systems and technology deployed in the past to deliver yesterday’s value proposition. Support for legacy technology is a necessary cost of doing business, commonly referred to as keeping the lights on. This consumes the majority of any IT budget, necessary investments in the software, hardware, services, and employees to keep it all working.  Nothing new and exciting here for the business.

20% of a typical budget is consumed by the necessary enhancements required to support that legacy technology and keep up with business growth. Beyond more of the same functionality, this funds upgrades to keep services current, keep regulators in check, and malicious events at bay. Again, very little new and exciting here for the business.

That leaves only 10% of a typical budget for new investments to drive the business forward. For the business, this is where new and exciting happens. And here lies the chasm and frustrations that result from IT not able to do enough, fast enough. This is where the IT constraint hits home for most companies. Markets are moving faster, and companies must keep up to remain in the game. To get ahead or disrupt, companies need to run even faster, requiring more investment in technology.

Which leads us back to that IT constrained resource matter. 10% just does not cut it anymore, and spend smarter can help. Companies need IT to find ways to free up more human and financial capital to fund new technology to move their businesses forward.

Using the 70/20/10 principle as a backdrop, technology managers need to create strategies that increase investment levels for new technology. Look at the 70% spend and develop ways to continue delivering the legacy technologies and services at lower cost and effort, freeing up staff and budget.

  • Standardize, consolidate, virtualize, and automate technology.
  • Sunset obsolete or little-used technology.
  • Review suppliers, securing the best prices for quality and service levels your business requires.
  • Consolidate suppliers, leveraging purchasing power to drive bigger discounts.
  • Review expenses for services, renegotiate rates, and remove waste or unused services.
  • Consider service providers to replace functions supported in house.

Next, look at the 20% expended on upgrades, growth, security, and compliance to find ways and means to deliver these at less cost and effort. Version upgrades for on-premise software and hardware, though necessary, can be a significant drain on both staff and budgets.

  • Consider cloud options.
  • Standardized technology and service offerings.
  • Standardized service management processes.
  • Consider Managed Service Providers.

Today’s technology managers must be ever mindful of finding the means to invest in new technology. Beyond annual planning exercises, this needs to be at the forefront of IT considerations every day. While the services and functionality legacy technologies provide are necessary to operate any business, spending smarter to deliver can reduce that overall burden of 70/20. Simply put, delivering legacy with the same business value for fewer increases the ability to invest in new.

Knowing every company is different, and how it will differ, the opportunity and results of spending smarter can be the same. Not only is that smarter, but it’s exciting for everyone involved.

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