Kicking the 80/20 Budget Habit

Kicking the 80/20 Budget Habit

Perhaps no C-level position has undergone as many changes in expectations, approaches, and philosophies over the past decade as that of the Chief Information Officer. CIOs have never had such a glorious—and challenging—opportunity to deliver significant, enduring, and transformational business impact and customer value as they do today.

But it’s not a job for the faint of heart.

Any CIO seeking the return to the good old days of bonuses based on uptime and SLA compliance should expect to be re-organized out of the CIO job and offered a position as Director of Infrastructure or Senior Project Manager.

For example, if the answer to either one of these questions (below) is yes, then time is running out for you to find new ways to kick the 80/20 budget habit, before you find yourself having the Director of Infrastructure or Senior Project Manager position realignment conversation with HR, or worse.

  1. Are you being asked to reduce the high percentage of the IT budget that is spent on keeping the lights on (K-T-L-O) operations?
  2. Is the CEO or your C-level peers asking you to find money in the IT budget to support their innovative and growth-oriented projects?

The CIO job itself continues to undergo a profound transformation that is forcing technology business management leaders to implement on-demand IT service functions, map IT budgets to consumer usage of IT services, and ultimately to revenue generation.

CIOs in the coming year are called to be a leader instead of a follower; a disrupter instead of a me-too’er, and a business-driven executive instead of a technology-focused manager. For most CIOs to do this will require a few paradigm shift on topics such as: IT business analytics, IT service management, breaking down technology-based silos, and adoption of SaaS, Cloud and Social solutions to drive business growth and innovation.

Many companies today are devoting approximately 80% of their IT budget to K-T-L-O operations, that is, they focus on running and maintaining what they’ve already got and leaving 20% for business driven projects.

Take a quick look at the usual suspects that got us hooked on the 80/20 budget habit:

  • server sprawl,
  • underused storage facilities,
  • data center growth,
  • labor-intensive operations, and
  • a never ending list of “strategic” vendors.

It is no wonder why, year after year, IT budgets are cut to the bone leaving, no monies for growth-oriented enhancements, optimization improvements, or business analytic tools.

The situations that created the 80/20 budget habit are simply no longer able to meet the needs of today’s self-service and always-on business requirements. The 80/20 habit is indeed a liability, not only because it is inadequate, but also because it consumes the bulk of the IT budget. This makes it impossible for CIOs to even consider investment in IT optimization solutions such as IT business analytics tools or Cloud or SaaS or Mobile or Social solutions.

Here are three steps to kicking the 80/20 budget habit.

  1. Determine which vendors are only exacerbating the habit, and which ones offer alternatives that are cheaper, faster, and smarter.
  2. “Think Big, but Start Small”. Get consensus from the CEO/CFO to allow 1% to 3% of the annual IT budget to be invested in IT business analytics tools.
  3. Make sure that new tools enable you to:
    • consolidate underused and inefficient systems,
    • replace archaic applications, and
    • re-engineer the IT budget for optimization improvements.

Success at kicking the 80/20 budget habit, like moving 80/20 to 65/35, can yield a 300% or greater ROI and will unlock value for the company that can result in bonus dollars as well as increased career longevity.

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