Where does the money that businesses invest in IT actually go? It’s a question that many a CFO has undoubtedly pondered over the years – and the honest answer may be a difficult one to stomach.
As recent research from the Cloud Industry Forums (CIF) shows, organisations are currently spending 41 per cent of their budgets on simply managing infrastructure. That’s a remarkably steep percentage – undoubtedly, far higher than it would be in an ideal world. In many ways, it’s a confusing statistic, too.
In 2020, should IT really be spending their days manually setting-up employee laptops, worrying whether all their system software is up to date, and firefighting tech problems? In an era of tools like SaaS, automated updates, and rapid deployment systems and services, shouldn’t it be possible to automate many time-intensive tasks? Despite the widespread availability of technology that can automate the majority of infrastructure management, the response seems to be ‘no’. Keeping the lights on remains a costly and time-consuming activity.
Where else do IT budgets go? The ever-ambiguous ‘projects’, of course. But what exactly are these projects about? And what do they really achieve?
When looking to innovate, many IT departments attempt to run before they can walk, trying to keep pace with business growth without proper strategic planning. Projects often become a ‘quick-fix’ solution.
At first, a lot of the goals sound worthwhile: “modernisation of the legacy”, “cloud migration programme”, et cetera. The reality of these projects, however, is rather more boring. Initiatives like these often amount to little more than “lift and shifts”. Organisations are taking what was once on a data centre and dropping it into the cloud with little to no refactoring or consideration of the benefits, or indeed the costs, associated with public cloud environments.
This is ‘transformation’ in name only. Much like endlessly raising the foundations on a house without ever actually constructing the building, organisations become trapped in a cycle of trying to maintain infrastructure, or in a cycle of shifting the location of legacy apps. IT justifies these sorts of projects as a necessity before the ‘real’ transformation can begin; but true transformation, in many cases, never gets the chance to begin. IT ends up losing sight of innovation. ‘Catch-up’ or ‘survival’ mode takes over and, as a consequence of this, the spending on managing and maintaining infrastructure remains at 41 per cent. Until we realise transformation and the real benefits of the cloud, we will never reduce this spending level.
It’s an approach that doesn’t come without cost: a business’ IT budget plus whatever opportunities have been lost.
Time for more innovation
IT isn’t entirely to blame for this situation. IT knows that its role is to innovate, but on such limited budgets, this can seem nigh on impossible. The answer, in part, lies in addressing the issue of budget and resource. After all, an IT professional is only as good as their tools – and team.
CIOs regularly blame CFOs for using financial risk as a reason for not approving projects. But CIOs often neglect the fact that they can leverage the conversation around ‘risk’ to their advantage. CFOs are some of the most attuned individuals to the reality of risk – it’s something they identify and mitigate every day.
Winning project approval from the CFO involves making a clear business case about what an organisation’s digital transformation will deliver in concrete terms. Another request for server purchases, just because, is not good enough. Digital transformation projects need to focus on an ambitious vision that will move the needle for the organisation and, ultimately, increase revenue. The trick is to think big – but measurably so – as the C-suite will want to track the progress of the project as it advances.
The coronavirus situation has really proved that point – IT budgets can be increased when the conversation around risk changes. Necessity is the mother of invention and innovation and never has IT had such an important opportunity to be the driving force of change.
Racing car manufacturers have designed and are producing breathing aids, clothing manufacturers are making medical masks and scrubs, engineering companies have invented entirely new ventilators, and the NHS is transforming its IT systems to ensure critical medical equipment is available to the most at-risk facilities. Organisations are transforming at a rate we have previously never seen. And it’s all because the conversation around risk has changed; it’s no longer a case of ‘can we afford it?’ for businesses, but ‘how can we afford not to?’
In other words, while IT’s predicament might seem hopeless, it does have an ‘out’. Business transformation, in essence, is a risk, and for IT to move forward, CFOs need to understand how the benefits outweigh, and even mitigate, the risks. Still, it’s up to IT to make the case and do the convincing.
Simon Ratcliffe is a Principal Consultant at Ensono, responsible for helping clients on their digital transformation journey. He holds degrees from the University of Cambridge and is Chair of the Digital Special Interest Group at CIF.