Friday, May 4, 2012

Break Out Of The 80/20 Spending Trap

My former colleague Bob Evans used to beat this issue hard, and it's no time to let up. With IT budgets relatively flat at most companies, and with competitors fighting for every scrap of business, CIOs can no longer afford to spend 70% to 80% of their precious funds supporting and maintaining existing systems. They must shift, permanently, a big chunk of their budgets into growth initiatives—IT projects and programs that open new markets and drive new business rather than just maintain the status quo. Even the most innovative IT users in the U.S., as represented by our annual InformationWeek 500 ranking, spend 63% of their IT budgets on ongoing operations as opposed to new initiatives—a percentage that has barely budged in a decade.
This isn't a theoretical exercise. Shifting from 80/20 or 70/30 spending to 60/40 or 50/50 won't happen if CIOs don't step forward with a detailed plan to make it happen. When he was CIO of Hewlett-Packard, Randy Mott got its IT pros spending just 30% of their time on maintenance, down from 70%, as part of a three-year master plan under which HP consolidated data centers, applications, and data marts and modernized its infrastructure. Mott's plan forced the company's IT pros to document every hour they spent on new versus legacy work, and it forced the company's LOB and IT execs to agree on the revenue and other benefits to be derived from each and every IT project.