CIO Strategy Capex Opex

Over the last few weeks, we have discussed the importance of a CIO having an IT strategy and a road map to execute on it. In  Part 4 of our SBS Strategy Series, we bring up another key element to the successful execution of the strategy which is funding. According to recent research involving over 2500 global CIOs, global organizations’ total revenue allocated to IT budget has declined from 8.1% in 2011 to 5.5% in 2014. It is no surprise that not every IT initiative will get a slice of the budget.

IT initiatives can be grouped in two main categories; those aimed at running the business and those aimed at growing or transforming the business.  While dedicating some of the IT budget for IT initiatives to run the business is essential, the perceived value is typically lower compared to IT initiatives that help drive more business or improve customer experience.  The bottom line is that operational excellence, as much as it is needed, is not a strategy.

It is clear that replacing a storage array because it is 5 years old with an increased rate of failure is a no brainer from an IT standpoint. But from a business perspective, what perceived value will the new storage array bring?  Uptime, performance and added capacity are likely not the key to unlock budget.  However, if we pair the storage refresh with the capacity required for the roll-out of a new online customer order system for example, we will shift the value perception. The maintenance cost savings for the new array is an added bonus. The run spend just became part of a transformation initiative.

The overall IT strategy should also take into consideration the type of budget available. If the organization’s business model favors OpEx over CapEx budget, capital intensive IT projects have lower chances of funding. Therefore, the IT strategy must adapt and focus on a service based model with external elements.  The fact is, line of business requirements will not change but how they are fulfilled can and line of business executives will look outside of IT to get what they need if they cannot get it internally.

Finally, we need to embrace the “good enough” approach for innovative IT initiatives. This is often called two-speed IT or also what Gartner refers to as bi-modal IT. Key systems supporting the core of the business took a lot of time, effort and money to become what they are. But for new ideas, starting small by limiting features for example and moving fast will have much better odds of getting funding. If the innovation drives the expected positive business outcomes, obtaining additional funding to expand on the success will be a lot easier.  On the other hand, if the initiative fails to deliver the expected outcomes, a lot less time and effort were wasted.

In closing, in order to fulfill his or her mission, the CIO’s strategy must not only focus on the value it can bring to the lines of business but also be flexible enough to adapt to the funding model.

 

The Strategic Business Solutions group at Long View welcomes your feedback and ideas.

Have a question or a challenge? Ready to build an IT strategy today? Email us: SBS.Research@lvs1.com