Market musings

4 Ways to Avoid an IT Budget Cut with Pain-Free Technology Deployment

by Julie Montgomery
June 28, 2017

Imagine a world where IT is seen as a strategic investment, not as a discretionary expenditure, and imagine that your foundational technology involves pain-free deployment. Companies such as Amazon, Google, eBay, and iTunes have redrawn the lines. It’s hard to tell where business ends and IT begins. These organizations use technology to differentiate in the marketplace and the value of IT is not questioned - it's used to help them dominate.

Although these are behemoth organizations, any size organization is capable of such a shift. IT leaders who lead the discussion of managing tech costs and ensure that any new technology selected involves pain-free deployment are earning a seat at the strategy table. By getting in front of the conversation, these leaders turn around the often-overheard discussion of “How can we cut the IT budget by 5% this year” and turn it to a proactive discussion that answers questions such as, “How can we use IT services to:”

  • differentiate?
  • increase profits this year?
  • beat a competitor?
  • get to market faster?

The secret to getting that strategic seat is to stop talking costs and start talking about value.

This blog outlines four opportunities that small business IT leadership can take to get to the strategy table. Each is an opportunity for strategic dialogue.

Price your services

IT has historically over-delivered, offering more services than the department is built to provide. Why? Because nobody understood the cost of that over-delivery.

Most likely, IT leadership didn’t build consensus or agreement regarding which services were provided to the business, nor show the costs of those services to the business. Step one to avoid an IT budget cut is to create a simple service catalog that outlines the services and the cost of those services to the business.

These costs, or prices, should include any acquisition, licensing, support, and maintenance costs associated with the service. You may consider offering various levels of support for each service, so that the business could make choices on their spending. For example, if the business understood the cost of a “1-hour response time” on a particular service, it may choose a slower time, if that service is not mission-critical.

Create regular "chargebacks" or "showbacks" for the internal customers

Once the actual costs of delivering services are understood, it is good practice to regularly communicate those costs using a clearly defined chargeback or “showback” system. Chargeback programs actually recover the cost by charging the departments using the services, but for small to medium sized businesses, this is most-likely too complex. A simpler approach is to regularly “show” the incurred costs by department. Even in organizations where there is no chargeback model, it has been shown that customer awareness of delivery costs for services leads to greater due diligence in how the services get consumed.

An added benefit from this specific initiative is that, in organizations where IT services are internally provided, management is aware of the actual costs of services, and has better information available when decisions must be made in terms of what services are providing the most benefit to the business.

Cull the herd

Building the service catalog should not be done only once. This should be an ongoing, organic living document. When doing this, you must be willing to walk away from old services, not hanging on to legacy services, simply because you’ve “always had them.”

This allows IT to focus on services that add value to the business, and to retire services which are no longer valuable. Culturally, this also gives the business the opportunity to prioritize and base decisions regarding expenditure company resources.

Embrace external service providers

Many external providers offer technology services (Google, for example), and many of those services are available in the cloud.  In 2016, Gartner predicted that a corporate "No-Cloud" policy will be as rare as a "No-Internet" policy is today.

This affects the role of IT professionals. In a defensive posture, many IT departments are in a race to show value, arushing to try to create competing services, rather than embracing them.

With so much pain-free technology deployment available, stop and rethink this. Maybe the role of IT is changing. Maybe the job of the IT professional is not to operate every server, but to thoroughly understand all external offerings, and how those offers may bring value to the business.

For example, (pardon the shameless plug here) Spoke Phone provides the features of an enterprise phone system with zero implementation costs, by turning employee phones into a smart business phone system, literally in 3 minutes or less. All at a price that is much more inexpensive than traditional phone systems.

Instead of spending money on new hardware, uptime and software that nobody uses, valuable IT resources can focus on managing the cultural adoption associated with such technology. 

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