IT budgets: it’s not what you’ve got, it’s what you do with it

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CTOs face a delicate balancing act where budgets are concerned. On the one hand, the pressure is (always) on to do more with less. On the other, maintaining momentum on a host of strategic imperatives often means something, somewhere, has to give.

Allocating resources wisely isn’t an easy task. Especially when IT is accountable to business and finance leads who will ask hard questions should projects fall by the wayside – or fail to deliver the anticipated outcomes.

Worse still, taking the foot off the innovation pedal risks losing ground where market competitiveness is concerned. Indeed, staying ahead of the curve is mission-critical when it comes to keeping up with changing customer demands or adapting fast to volatile market conditions.

One thing’s for sure, freezing hiring or cutting teams to save budget are sure fire ways to shoot the business in the foot. Tech leaders know they need the right people to get the jobs done.

Which leads us to the big question: when money is tight, what’s the best way for CTOs to apportion budget?

Step 1: undertake purposeful prioritisation

Deciding how to cut the cake begins with doing the numbers. CTOs will know how much money should be allocated to keeping infrastructure and platforms ‘up’ so BAU operations aren’t compromised.

Having accounted for the fundamentals, the remaining budget can then be allotted against big strategic projects or innovation – or both. Which is where the skill of purposeful prioritisation comes into play.

An artform in itself, knowing what to prioritise can prove a tough call – especially when there are multiple (often long term) strategic projects vying for precious resource. Meanwhile, innovation budgets typically get shunted to the back of the queue.

It’s an issue we frequently help our clients out with. When you have to pick the ‘top 5’ priorities to invest in, you need to figure out which activities will deliver the best ‘bang for buck’.

To do this involves validating why and where the money is being spent and if things could be done better and faster – or indeed whether it’s time to call time on a project if it’s not delivering anticipated value.

When CTOs get this right, they can figure out which big strategic projects to prioritise while ring fencing funding for the pursuit of innovation. This assures new feature creation so the business can nimbly respond to customer feedback.

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Step 2: working smarter and with focus

Steve Jobs hit the nail on the head when he said that it’s impossible to chase down multiple good ideas. When money and resources are in short supply, choosing what not to do is the key to unlocking value and success.

It’s a concept that’s core to agile project management frameworks like scrum where decisions are based on observation, experience and iterative progress towards a well-defined goal.

If there are multiple opportunities to improve the web experience, for example, do all you can to isolate the feature that’s going to return the most value. It’s unlikely you’ll need to completely rework the entire customer journey to get a great outcome – so don’t try. Add the new feature, improve the experience and move on to the next pressing priority. By applying some smart lateral thinking, you’ll achieve maximum impact for minimal investment.

When it comes to innovation, testing and hypothesising what will work and won’t work is the key to refining what’s worth doing and spending more money on. And what’s not. That includes product experimentation.

It’s a process that the UK government got absolutely right with its digital service delivery framework. Dedicate a small initial budget to discovery, review the results and evaluate the benefits and the cost. Then determine whether or not to release more budget for further development or abandon and focus on another good idea that potentially holds more promise.

Step 3: consider creative ways to deliver outcomes

Never overlook the value of going back to basics to find the one thing that can be flipped or changed to generate measurable benefit to the business.

For example, if saving money is a top strategic driver then directing time and resources to automation projects that will free up people to do more value driven activities may be the right decision to take. Minimal investment here may generate long term benefits that go straight to the bottom line.

The 80-20 rule – also known as the Pareto Principle – asserts that 20% of activities will account for 80% of outcomes or results. So the challenge here is identifying which inputs will potentially be the most productive and making these the priority.

Step 4: create feedback loops

To steer the IT organisation in the right direction, staying close to the money and frequently measuring project activity and outcomes is often critical. Here, the aim of the game is to gauge progress, make decisions fast and reallocate resources as needed.

Defining the right metrics that determine what success looks like will be critical for ensuring that everyone is working towards an agreed common goal. It also means that spend can be evaluated against delivery outcomes and value, ensuring that business cases can be built for investing in any good ideas or projects that have been identified as justifying prioritisation.

Embracing a metrics-based evaluation process not only ensures that budgets are being focused in the right areas. It also enables the CTO to have data-led discussions with the CFO and CEO on why funding is being directed to some projects – and not to others.

Ultimately, there’s never going to be enough resource to do everything IT or the business want. At the same time, there’ll always be opportunities to improve that have been overlooked. It’s a balancing act but get it right and you’ll find that budget pressures won’t stop you delivering real value for customers.

If this is new to you or you need help putting the right metrics in place – give us a shout.