The delicate business of justifying IT expenditure

As a result of the recent financial crisis, the constant fear of a double dip recession or, at the very least, an uncertain and unstable economic climate where long-term commitments are not convenient any more has led organisations to become more careful with where they spend their money and what they want for it.

This means that it is now even more difficult for the IT department to convince Financial Directors to invest in their projects or assign a bigger budget to them – the finances always seem to be needed elsewhere as a priority.

And even when the business does concede a budget to IT projects, it normally covers the bottom line – hardware or software that is urgently in need of replacement – while Service Management is kept at the bottom of the priority list.

But if this can initially make sense from a practical point of view, it may have a negative outcome if not backed by the appropriate Best Practice processes and instead of saving the company money, might result in added unforeseen costs which could have been avoided with a smarter budget allocation.

Take a move from Windows XP or Vista to Windows 7 for example, operation which many organisations have been undertaking this year. Although it is still a Windows Operating System, there are many differences in the new version for which some of the applications used by the company, especially in-house software designed for that specific organisation, might not work at all.

If the appropriate Change Management process is adopted and the issue is dealt with in a timely manner, which includes adapting or changing the application before all the desktops across the organisation are updated, continuity can be guaranteed. But if this is not the case, users will find themselves unable to work and clients unable to use the company’s services – with financial and reputational loss as a result.

A Financial Director can understand the importance of having processes in place, as they have their own procedures to follow in their work. But to understand the value of processes within IT, and therefore of putting money towards improving the way the IT department carries out its functions, their view has to shift to a new concept of IT as a ‘service to the business’ – where every other department in the company is their client and will benefit from improvements to the service they provide.

In any case, figures published by Gartner suggest investment in IT is increasing more than expected: IT expenditure is predicted to grow by 7.1% this year, which is higher than the 5.6% previously believed. Just two years ago, the growth was -4.8: organisations are either taking risks again, desperately in need of replacing old systems and devices, or investing in new technology believing it will save them money in the future.

Computer hardware is at the top of the list for expenditure with a growth of 11.7%, although it has decreased from the previous year where it reached 12.1% growth. Software expenditure has instead increased from a growth of 8.4% in 2010 to 9.5% in 2011. Finally, IT Services has more than doubled its growth rate: if in 2010 it grew by 3.1%, in 2011 this is up to 6.6%.

These figures speak for themselves: not only Financial Directors are spending on IT again, they are changing their priorities: software, including Service Management applications, is becoming more important than shiny new hardware; more importantly, the use of services such as consultancy has increased.

Buying ‘knowledge’ and ‘expertise’ in just the right doses needed for their projects and seeking guidance to carry them out in the best possible way is the new winning strategy for many organisations.

Businesses have perhaps become smarter in the way they invest their budget, finding new ways of reaching cost-efficiency: mature Best Practice processes, guidance from external experts and treating IT as a service to the organisation being at the top of the list. In this way, they get a good ROI – they can enjoy an improved IT service and, as a result, a better chance to increase their business success.

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Jennifer Norman is Technical Consultant at Plan-Net. After more than a decade working in technical roles such as server analyst and infrastructure solutions architect, she has recently made the leap to consultancy. Her technical background and experience of working in-house is valuable in helping client organisations complete their infrastructure projects successfully as well as advising them on the best solutions to improve their IT function.