It is helpful to periodically assess your
Information Technology (IT) spending
habits. Evaluating, carefully planning, and
investing wisely may help you reach
short-term business goals such as improved
sales or fundraising as well as strengthen
your business for the long-term.
To help assess these habits, you may want to look at a few
Key Information Technology
“Metrics” that are relevant to the business
and can impact business outcomes.
Review the business value of your IT expenditures.
For example, take a hard look at nondiscretionary spending.
No one will disagree that you need to spend money on
maintenance and maintenance is mandatory for a business.
But are you spending for services that you don't need?
What should you do?
– Review all contracts – hardware, software,
support, etc.
Review your IT Spending Ratio.
IT budgets vary by industry and can range anywhere from 2%
to 8% of revenues (this is down from prior years). Research
by both Forrester and McKinsey indicate an average
organization spends 70 to 80% (higher for smaller
businesses) on maintaining a status quo. Only 20 to 30% is
spent on new initiatives. Best practice is a 60/40 ratio
(maintenance/new initiatives).
What should you do?
— If you are at an 80/20 ratio, now may be the right
time to start thinking differently about your
spending habits. Work to start moving to a 60/40
ratio. Include tasks such as reviewing all
contracts and assessing current policies and
procedures. Consider if it is possible to
standardize, simplify, or automate some aspects of
the IT function.
Review IT's “Operational Health”.
This includes items such as the
reliability of your IT assets and your ability to deliver
projects successfully.
Reliability of your IT assets.
Review the reliability
of your IT assets (hardware, software and network) for
both internal and external “customers”. Outages and
downtime such as power outages or security breaches can
have a serious impact on a business.
For example, internal employees are concerned about
accessing applications to support clients and compete;
external customers and clients want to be able to access
websites. Both groups have email communication
concerns. Think about a time when you contacted a
service provider and were placed on hold because “their
system was down” or “our systems are not integrated” or
“the system is slow”.
What should you do?
— Work with your internal or external information
technology consultant (s) to develop service level
metrics for IT service reliability that are
measurable and lead to “customer” satisfaction.
Deliver projects successfully.
Technology projects can take on a life of their own.
Each project should have a clearly defined scope,
budget, schedule and deliverable(s).
What should you do?
—
Work with your internal or external information
technology consultant(s) to develop a “Contract” or
a “Statement of Work” for every project and consider
cancelling projects that:
-
Fail to live up to expectations,
-
Benefits no longer outweigh the costs,
-
Business need no longer exist,
-
Key assumptions have not held,
-
Expected objectives and/or key results/success
factors are no longer achievable, and last
-
No Management Sponsors — NO ONE CARES
How
to Move from 80/20 to 60/40 Article
Issue 45, March 2009
