Close
  • Latest News
  • Big Data and Analytics
  • Cloud
  • Networking
  • Cybersecurity
  • Applications
  • IT Management
  • Storage
  • Sponsored
  • Mobile
  • Small Business
  • Development
  • Database
  • Servers
  • Android
  • Apple
  • Innovation
  • Blogs
  • PC Hardware
  • Reviews
  • Search Engines
  • Virtualization
Read Down
Sign in
Close
Welcome!Log into your account
Forgot your password?
Read Down
Password recovery
Recover your password
Close
Search
Logo
Logo
  • Latest News
  • Big Data and Analytics
  • Cloud
  • Networking
  • Cybersecurity
  • Applications
  • IT Management
  • Storage
  • Sponsored
  • Mobile
  • Small Business
  • Development
  • Database
  • Servers
  • Android
  • Apple
  • Innovation
  • Blogs
  • PC Hardware
  • Reviews
  • Search Engines
  • Virtualization
More
    Home Applications
    • Applications

    Mere Cost Cutting May Not Be Answer

    By
    Cheryl Balian
    -
    January 7, 2002
    Share
    Facebook
    Twitter
    Linkedin

      The CIO who breaks out the budget hatchet in a tough economy may be hurting—not helping—the companys business. And, if there was ever a time when draconian technology budget cuts became the norm, it was last year.

      “2001 was the first time weve seen IT budgets going into steep decline, and there were many knee-jerk reactions,” said Howard Rubin, an analyst at Meta Group Inc., a consultancy in Stamford, Conn. “Some CIOs cut right into the muscle of the organization, decimating key value-producing areas.”

      This years new reality is that, downturn or no, maintaining a healthy IT budget means more than keeping costs down. Just as stocks, bonds and cash make up a sound portfolio, CIOs must learn to manage capital like a financial planner, balancing value, risk and costs to closely align the department with the companys direction.

      “This approach creates credibility with business leaders and gives them confidence that the IT organization understands their issues,” said E.P. Rogers, vice president and CIO of The MONY Group Inc., in New York. “We spend less time trying to prove our value and more time delivering meaningful results.”

      Todays forward-thinking corporate leadership acknowledges that IT organizations must help drive business direction; they cant simply follow along. “Smart companies dont slice what is value-producing to the organization,” Rubin said.

      To maximize IT capital, an attitude make-over is in order.

      A good place to start is the approach to assets. Many companies continue to regard tech properties as expenses. In reality, experts say, they are investments. In a recent Meta Group study of Global 2000 organizations, 80 percent of respondents said they spend more than half their IT budgets on the business, with only a fraction of the budget going toward cultivating new opportunities.

      Enter the new IT world order. “There are three fundamental portfolio categories that CIOs should structure their budgets around,” Rubin said. “Running the business, growing the business and transforming the business.”

      While the running-the-business portion comprises core, nondiscretionary costs such as operations and infrastructure, growing the business should be separated and itemized as an equally important entity. For example, IT enhancements should support basic business change and evolution, whether theyre benchmarking against competitors or evaluating service vendors.

      Similarly, business-transforming investments—whether theyre a step into new technologies, approaches or models—are just as critical because they lay the groundwork for entry into emerging markets.

      Those in the trenches agree with the CIO-as-fund-manager approach. “Systematically managing the IT portfolio of assets and projects should become a way of life for IT execs,” said Joseph Castellano, CIO of Verizon Communications Inc., in New York. “The key is to continually assess a portfolios priorities, which helps gain the visibility to make tough business decisions.”

      MONYs Rogers said, “We aim to spend our IT dollars in ways that make the biggest strategic impact. In fact, this approach helps with recruiting and retention; as employees understand what is important, they feel a sense of making a difference that otherwise they might not have.”

      While each companys needs are different, a generally well-balanced IT budget dedicates 30 percent of assets to running ongoing applications and operations, with the remaining 70 percent aimed at growing and transforming the business, experts say. Just as important, reviewing those investments early and often should become a part of everyday life in the corner office.

      CIOs who have learned to view their budgets more holistically are already beginning to see the savings and benefits. “Over the past five to six years, weve moved from spending 90 percent of our application development dollars on maintenance to spending 30 percent to 35 percent on maintenance,” Rogers said. “This has freed up significant resources and money to implement IT projects that help us restructure the way we do business.”

      At a minimum, IT leaders should undertake quarterly reviews, just like the rhythm of the quarterly financial reporting processes. “Companies are missing out if theyre not using the same tempos in the IT department that are being used in the financial model,” Rubin said. “Its shortsighted to focus only on current price. Future yield, risks and benefits timing must all be part of the mix.”

      This doesnt mean the diligent CIO should reshuffle the game plan every three months. It simply means that a quarterly review should be used as a checkpoint to ensure the IT department is still aligned with the companys prevailing direction, Rubin said.

      Then there are triggering events that necessitate more frequent budget examinations. These events include economic shifts or the departure of a visionary IT manager whose project may not be relevant to company goals. Regardless of economic climate, the savvy, post-boom CIO manages the departments investment yield from the vantage point of risk vs. return.

      Free-lance writer Cheryl Balian can be reached at [email protected]

      Cheryl Balian

      MOST POPULAR ARTICLES

      Android

      Samsung Galaxy XCover Pro: Durability for Tough...

      Chris Preimesberger - December 5, 2020 0
      Have you ever dropped your phone, winced and felt the pain as it hit the sidewalk? Either the screen splintered like a windshield being...
      Read more
      Cloud

      Why Data Security Will Face Even Harsher...

      Chris Preimesberger - December 1, 2020 0
      Who would know more about details of the hacking process than an actual former career hacker? And who wants to understand all they can...
      Read more
      Cybersecurity

      Visa’s Michael Jabbara on Cybersecurity and Digital...

      James Maguire - May 17, 2022 0
      I spoke with Michael Jabbara, VP and Global Head of Fraud Services at Visa, about the cybersecurity technology used to ensure the safe transfer...
      Read more
      Cybersecurity

      How Veritas Is Shining a Light Into...

      eWEEK EDITORS - September 25, 2020 0
      Protecting data has always been one of the most important tasks in all of IT, yet as more companies become data companies at the...
      Read more
      Cloud

      Yotascale CEO Asim Razzaq on Controlling Multicloud...

      James Maguire - May 5, 2022 0
      Asim Razzaq, CEO of Yotascale, provides guidance on understanding—and containing—the complex cost structure of multicloud computing. Among the topics we covered:  As you survey the...
      Read more
      Logo

      eWeek has the latest technology news and analysis, buying guides, and product reviews for IT professionals and technology buyers. The site’s focus is on innovative solutions and covering in-depth technical content. eWeek stays on the cutting edge of technology news and IT trends through interviews and expert analysis. Gain insight from top innovators and thought leaders in the fields of IT, business, enterprise software, startups, and more.

      Facebook
      Linkedin
      RSS
      Twitter
      Youtube

      Advertisers

      Advertise with TechnologyAdvice on eWeek and our other IT-focused platforms.

      Advertise with Us

      Menu

      • About eWeek
      • Subscribe to our Newsletter
      • Latest News

      Our Brands

      • Privacy Policy
      • Terms
      • About
      • Contact
      • Advertise
      • Sitemap
      • California – Do Not Sell My Information

      Property of TechnologyAdvice.
      © 2021 TechnologyAdvice. All Rights Reserved

      Advertiser Disclosure: Some of the products that appear on this site are from companies from which TechnologyAdvice receives compensation. This compensation may impact how and where products appear on this site including, for example, the order in which they appear. TechnologyAdvice does not include all companies or all types of products available in the marketplace.

      ×