How strategic IT planning and budgeting drives long-term success.
Despite increased investments in advanced technologies, many organizations cling to the notion that IT is a cost center that doesn’t improve profitability. This fact is demonstrated by the focus of IT leaders. In Foundry’s State of the CIO Study 2024, just 29 percent of respondents described their role as “business strategist.” Most IT leaders still consider their role to be “functional” or, at best, “transformational.”
That’s unfortunate, given the ability of technology tools to drive efficiencies that keep operational costs in check. More importantly, the right IT investments can deliver business value that improves both the top and bottom lines.
The problem is that many organizations don’t approach IT strategically. They struggle with outdated systems, spending most of their IT budgets just to keep things up and running. The focus is on lowering those costs rather than investing in new solutions that can drive innovation.
Strategic IT planning and budgeting can provide a blueprint for investments that support the organization’s short- and long-term business goals. Business leaders should periodically review their systems, applications and infrastructure and consider new solutions that could enhance productivity and customer service. This kind of fact-based analysis arms them with the information needed to better guide IT spending.
Too Much Budget Spent ‘Keeping the Lights On’
Gartner’s “Run, Grow and Transform” model has long served as a framework for assessing the IT environment. Technologies in the “Run” category include mission-critical servers and applications that keep the company operating. “Grow” investments introduce new or improved capabilities that enhance business performance, while “Transform” investments enable organizations to roll out new products, services and business models. Studies show that organizations continue to spend most of their IT budgets on “Run” technologies.
“Run” technologies require ongoing administration and maintenance and periodic upgrades to ensure reliability. Any cuts to the “Run” budget increase operational risk. However, organizations shouldn’t dedicate the entire IT budget to “Run” technologies — often called “keeping the lights on.” They need to invest in solutions that can enable growth and drive long-term success.
When determining how much to invest, it’s important to consider the total cost of ownership of IT solutions. In addition to the capital cost of the equipment, there are ongoing expenses for maintenance contracts and software licenses, as well as operational costs for management and support.
The flip side is that costs for maintenance agreements and support tend to rise as equipment ages. Organizations may be able to offset some of the costs of new equipment while also gaining new functionality and better performance.
Beware of the Cloud Cost Conundrum
Small to midsize businesses (SMEs) often turn to cloud services to stretch their budget dollars. Cloud-based services shift the capital expense of technology to a service provider, along with some maintenance-related operational expenses. In addition to making IT budgets more predictable, the cloud gives SMEs access to applications and infrastructure they might not otherwise be able to afford.
However, there are tradeoffs when shifting costs to the operational side of the ledger. Too many organizations adopt cloud services without giving it much thought. Subscription expenses continue to add up and increase as cloud usage grows. Organizations need to look at those costs over time compared to a capital investment in technology. In some cases, the cloud can be the more expensive option due to licensing models and other factors.
Of course, cost should not be the only factor when determining which technology, services and applications should be kept in-house and which should be moved to the cloud. Organizations should carefully evaluate which model will best support their business processes and objectives. The cloud isn’t the best platform for every application due to performance, availability and security concerns, and it may not be practical or even possible to migrate existing applications to the cloud. That’s why organizations should first develop a strategic plan to guide the selection of solutions and services.
How an MSP Can Assist with IT Strategy
The problem is that many SMEs lack the skills and resources for IT planning. The persistent IT skills shortage makes it difficult for SMEs to find and retain the talent needed to identify strategic upgrades, select the right solutions and services, and manage the implementation process.
A managed services provider (MSP) can help organizations overcome these challenges. Qualified MSPs have experienced consultants who stay abreast of the latest technologies and real-world use cases. They can help SMEs develop a two-, three- and five-year strategic plan for utilizing technology to drive growth and competitive advantages. They can then help SMEs evaluate alternatives, calculate long-term costs and risks, and implement new solutions with minimal disruption to day-to-day operations.
Technology can help organizations improve efficiency, minimize risk, reach more customers, provide better services and forge new business partnerships. Faced with budget and staff limitations, however, many SMEs cling to outmoded systems that limit their growth and competitiveness. Strategic IT planning and budgeting can help these organizations reduce costs and implement technologies that will drive long-term success.