IT Budgeting

Managing IT costs and value is fundamental to the role of the IT function within an organization. Indeed, it is the highest priority after the actual delivery of IT services, and with the latter being increasingly automated, controlling costs and realizing the value of investments accounts for a high proportion of IT management time. The discipline has historically had a cyclical aspect, with a sometimes impetuous search for a competitive edge in periods of technology hype and growth, followed by periods of rationalization and realism when economic conditions are tougher. Several factors are combining however to change this pendulum. A protracted phase of financial constraint, industry shifts wrought by the disruptions of cloud computing and consumerization, and the increased integration of IT into business operations, make uncompromising cost control an ongoing necessity. Value management is regrettably less mature, but technology is in most sectors a primary driver for innovation, and if enterprises are to realize value from technology investments, it is essential that they also develop this as a fully-integrated IT and business capability. 

Key findings 

As business operations become increasingly IT-centric, there is a greater demand for IT costs to be visible at a functional level, and to be reported in relation to business metrics such as 'tonnes produced', 'customers served', or 'miles travelled' 

• Cost visibility must also be accompanied by cost control levers that the business can use to balance and fine tune cost, risk, and quality of service 

• Reducing 'business-as-usual' spend requires a relentless focus on consolidating and optimizing costs across infrastructure, applications, sourcing, and service delivery 

IT value creation should be developed as a business capability rather than the sole responsibility of the IT department 

• Organizations should master some basic disciplines of cost and value management, before jumping headlong into more complex approaches 

• Organizations must continue to seek infrastructure unit cost savings by persisting along the route of consolidation, virtualization, and automation 

• With the proliferation of mobile devices in the enterprise, many organizations will fall into the trap of adding to the total enterprise IT cost burden rather than reducing it. 

• The application portfolio should link application assets to business function and process, to help analyze delivered business value 

• There are four value propositions that IT brings to business through IT operations and investments: value preservation, value unlock, value add, and value creation 

Contact us for more information or to request a copy of "Managing IT Costs and Value" by Tim Jennings and Terry White for Ovum.