Like it or not, you’re spending money every year on technology for your business. And because technology evolves rapidly, it’s never easy to know exactly how to apply your IT budget for the greatest gains.
We’ve compiled and scored this short list of IT budgeting mistakes to highlight how difficult this challenge can be, and how to save money by avoiding them.
MISTAKE: You’re more likely to think of technology as a money pit than a business enabler
WASTE FACTOR: 4
Keep your feet on the ground by all means, but don’t underestimate the limiting effect of being pessimistic or just downright negative about the potential for business improvement through technology. We aren’t arguing for blind faith; just to keep an open mind on technology opportunities or risk missing out on them altogether.
MISTAKE: You cut budgets when things get cheaper
WASTE FACTOR: 6
By its very nature, much of the technology you buy on a per unit basis will cost less over time. Where it used to cost £25,000/year to have a broadband connection it now costs £250. Or where today’s 1 Gigabyte of storage costs a few pence, it used to cost several thousand pounds. Now you simply must take advantage of these changing economics, but think again about simply pocketing the difference.
Rather than cutting your overall IT budgets in response to these case-by-case anomalies, explore how to reinvest your savings in technology to deliver greater competitive advantage. Don’t penalise every underspend with under-resourcing; rather, make sure you have a good view of the evolving technology landscape to make better forward planning decisions.
MISTAKE: You view disruption as a bad thing to happen to your IT
WASTE FACTOR: 7
OK we’re messing with semantics a little bit here. Committing budget to stop disaster striking your IT systems is money well spent, but that‘s not the only ‘disruption’ we’re talking about. More and more advanced exploitation of cloud IT services, broadband and mobile computing are massively disrupting how technology is used and paid for. So if you insist on keeping things exactly the same way they’ve always been, for an easy life, then don’t be surprised when competitors manage to derive superior technology benefits on a more advantageous cost/consumption model.
Or think of it another way; what are the costs of not embracing new technologies, or being unwilling to entertain radical IT approaches that might temporarily cause some disruption to your business? If you were to examine the leading business in your sector, and how they use technology now compared to 10 years ago, then the difference will be both remarkable and measurable, in terms of greater agility, efficiency and productivity.
MISTAKE: You protect your operational IT spend by eroding the money reserved for interesting new stuff
WASTE FACTOR : 10
This is arguably the biggest mistake of all. Businesses typically spend about 75% of their IT budget on things that maintain business-as-usual. In other words: the operating costs of IT. The remainder can go toward new approaches to delivering your service, helping your customers or creating a completely different product. This 25% is the ‘IT innovation budget’. Now there are no hard and fast rules on this 75/25 split, and it may be different in your organisation. The mistake is allowing the innovation budget to be slowly eroded. In many cases where this has been allowed to continue over several years, the organisation somehow manages to spend more on its overall budget while spending less on how it innovates through technology.
When this happens it can drive a wedge between management and IT personnel, as the reasons for escalating cost are not fully explained or accepted. The key to reducing IT operational spend is to find opportunities to automate manual IT management processes, but this process is only likely to begin in the context of positive internal relationships where the business backs the use of technology to meet its goals, and the IT function is supported to identify new tools and skills.
MISTAKE You don’t listen to your IT users
WASTE FACTOR: 4
The people who use the IT you pay for fulfil a vital role in the performance of your business. Try to avoid looking at technology as an employee perk; that somehow their calls for a better mobile device or software application is a self-centred proposal rather than one that works for the greater good.
Accept that your IT users have unique perspectives on the workings of your internal business processes and can unlock huge financial benefits if you harness them. You can even put users on the spot by encouraging them to develop new technology business cases that map out the benefits to the organisation. Even if this path provokes you to spend more money on technology, you’ll be able to net this off against solid returns on efficiency and innovation.
MISTAKE: You invest in growth without making sure your business processes are sound enough to cope
WASTE FACTOR: 9
Your success relies on the robustness and efficiency of your business processes, and it may appear that these operate smoothly enough for the time being. However, introduce greater work volumes and more people, and what were just tiny cracks start to splinter into huge systemic failures.
Technology – specifically the correct use of software – has a major part to play in improving the slickness and profitability of business processes. The trick is to identify weaknesses before you invest in growth. This ensures the pathway to financial success, rather than potentially putting your business on hold while urgent process repairs are carried out.
MISTAKE: You outsource things without guarding against the law of unintended consequences
WASTE FACTOR: 8
Continuing the business processes theme, it has become popular for organisations to outsource one or more of their more troublesome processes to a third party (commonly known as Business Process Outsourcing, or BPO). In this way, the issues related to executing an efficient process can be effectively forgotten about in exchange for a predictable monthly cost. While this is clearly preferable to many, and works well for certain processes in certain industries, it often overlooks the unpredictable knock-on effects of dabbling in business process change. Namely, the impact on the business’s adjacent systems and processes, the experiences of its users or even the lost potential to wield a better business process as a competitive weapon.
Ask 100 business leaders and they’ll all say we are living in the ‘age of digital’ where data moves at the speed of business and the new possibilities of cloud bring endless opportunity. To my mind, only 50 or so will be actively embracing technology developments and feeling excited by the speed of it all. The others – perhaps – believe IT is more of a necessary evil; a hungry furnace that must be grudgingly fuelled 24/7 lest the fires go out and the organisation grinds to a standstill.
However you manage your IT budget, don’t give up on the transformative potential of technology and software. We believe you don’t have to be a technology know-it-all to deliver benefits to your organisation.