While listening to a colleague go on about the effort that needs to go into cutting IT operations spending to increase budget for digitalization projects, Julie Andrews came to mind.
Yes, Julie Andrews. I guess I need to explain that I had just watched “The Sound of Music” for probably the 45th time two nights before and had just made my travel arrangements for our user conference in Salzburg in May – so maybe it was a convergence of neurons in my brain that lead to this “A-ha!” moment. Well, Julie (as Maria) sings “Nothing comes from nothing, nothing ever could.” So let’s apply this to digitalization.
Digitalization won’t come from nothing – despite it being just a bunch of 0’s and 1’s. This fundamental change in how we do business brings with it so many new requirements that cost money: new technologies, new development approaches, new markets to enter, newly acquired companies, lots of new projects and lots of new resources with all the newly needed skills! Is your current investment margin enough to cover the costs of digitalization? A great part of your IT budget is surely being eaten up keeping daily operations going.
You have two choices – actually three if you count doing nothing as a choice – but let’s assume here you really do want your company’s digital transformation to succeed. One: you can do what you’ve always done to cut expenses, things like: stop hiring, freeze the IT budget, terminate sub-contracting agreements, and renegotiate contracts with IT vendors. That is reactive, tactical maneuvering and it is as good as doing nothing - because the constant lack of enough investment budget is systemic. It needs to be met with a strategic response. And that takes work.
Strategic, sustainable IT OPEX reduction and CAPEX optimization must be met with an architectural approach:
- Strategic alignment and prioritization
- Portfolio optimization
- Balance of centralized vs. decentralized IT governance
- Maintenance and process outsourcing
- Shared infrastructure services and infrastructure innovation
And I won’t lie to you - this is a big job. You will need to map IT spend to what is actually being done in IT to support business – not just to technologies. Otherwise you risk cutting costs that could damage business initiatives. Mapping involves knowing how applications support business so you will have to have this architectural insight available. And mappings need careful consideration, for example, knowing the number of users supported, business service calls and executed processes to be near the truth of business usage.
The other mapping you will need to do is investment mapping in order to understand which investments (or projects) are actually contributing to business strategy. You can also map investment spending to products and services captured as part of your architecture repository for further insights. We see many instances of this at our customers with savings in millions. Just think what you could do with that additional spending money.
The first episode in Software AG’s second Alfabet Portfolio Playbooks series concerns itself with optimizing IT spending. Via slides and live product demonstration, the presenter provides valuable advice finding needed funding for your company’s digitalization efforts.
Oh yeah – and after the “nothing” bit, Julie sings “So somewhere in my youth or childhood I must have done something good.”
Do something good - check out the webinar “More Bang for the Buck from IT Spending” and I assure you, you will have enough new pocket change for your favorite (digital) things.