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Smart Enterprise: Greater Expectations

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Rama Dhuwaraha, CIO of Lexington Fayette Urban County Government in Kentucky employs this strategy. "We don't recommend any project unless there is a busi- ness component and sponsorship," says Dhuwaraha. "I've made it clear that there are no IT projects, only business projects in which IT is a component." Such alignment between IT and business value can relieve the pressure to reduce costs that troubles so many CIOs. "You can't win a cost discussion with the business, because the discussion is always going to be, 'Can't you do it for less?' " says Peter Hinssen, Managing Partner at Across Technology, a CIO consulting fi rm. "CIOs need to transform that discussion into a value dialogue and start talking about IT as a portfolio of business investments. That's a whole new mentality." Plan B Budgeting As CIOs work to align their IT budgets with business value, one concern relates to the concept of the annual budget itself: Is a single budget for the coming year the way to go? Or should the budget be more dynamic to account for possible changes in the business and for unforeseen technology advances? With recent economic reports hinting at continued fi nancial uncertainty in 2011, does that imply that the budget should be dynamic and adaptable to different scenarios? Probably. "In today's economy, I can't just have plan A; I have to have plan A, B and C," says Dhuwaraha , who works with an annual IT budget of about $7 million. Dhuwaraha expects his local economy to begin recovering in early 2011, but even if it doesn't, he's prepared. "We start with a baseline budget tied to expected city revenues," he explains. "If revenues are down, we have plan B and C ready to execute. We know which projects will take priority and which will be cut." A fl exible IT budget also helps CIOs capitalize on unexpected technology advances. "The rate of change we have in technology today, and the agility required of IT doesn't allow the CIO to think in terms of annual bud- gets anymore," says Hinssen. "If a technology advance arises — and it's a good opportunity for the business — you should be able to invest in it. Hiding behind an annual budget just doesn't work." Cloud computing, for example, can help build some flexibility into the IT budget. "If your top line is down by x percent, then IT is going to have to share the pain," says Bart Perkins, Managing Partner at Leverage Partners, a CIO consultancy. "This argues for a variable-cost IT PHOTOGRAPHS (LEFT TO RIGHT): IAN MCKINNELL/GETTY; THINKSTOCK There are two critical challenges in the IT budgeting process: driving effi ciencies in the "keeping the lights on" budget and evaluating the return on investment (ROI) of discretionary IT projects. Judicious use of information technology addresses both. "You can't manage what you don't measure," says Denise Kalm, Product Marketing Manager at CA Technologies, who is also an ITIL ® Capacity Manage- ment Practitioner. "If you don't have information about the systems and so - ware performing key business processes, you don't know enough to manage the fi nances and the budget." Resource management so ware such as MICS ® Resource Management from CA Technologies can help. It automates analysis of the raw data coming in from all the systems and so ware performing various business processes, enabling CIOs to measure and report on metrics that indicate usage and effi ciency. By adding fi nancial fi gures, such as cost per CPU core or cost per megabyte of storage, CIOs can better understand the costs. This helps CIOS devise a budget that will meet future requirements for capacity and performance. "When you review a business process such as online ordering, you need to account for the resources that contribute to the transaction, how busy they are and how eff ectively they are working," says Kalm. "Resource management so ware helps you defi ne key processes and locate the resources that contribute in terms of performance, capacity, utilization and cost. It stores the data intelligently and facilitates reporting so you can mine the data to make budgetary decisions." LEADING ROLE So ware can also assist CIOs in evaluating the fi nances of projects in the IT invest- ment portfolio — essential when justifying ROI to ward off attacks on the budget. "I see a big role for technology in improv- ing the IT budgeting process, in terms of planning, generating proper reports and being able to create realistic scenarios," says Rama Dhuwaraha, CIO of Lexington Fayette Urban County Government in Kentucky. That is a core capability of a project and portfolio management (PPM) solu- tion. "PPM functions as the CIO's system of record," says Jose Mora, Senior Director of Product Marketing for CA Technologies' Clarity PPM. "It off ers visibility into the projects where the budget is being spent, how it's being spent, and which course corrections are needed as the market and business changes." PPM Solutions help CIOs do realistic scenario planning for proposed IT invest- ments, a er assigning metrics related to costs, risks and expected ROI. Workfl ow features can help in gathering and docu- menting input from stakeholders across the enterprise. Peter Hinssen, Managing Partner at consultancy Across Technology, sees such tools as a boon to the budget process. "Realistic scenario planning applied to an IT investment portfolio," he says, "is light-years ahead of the old concept of IT budgeting." – T.F. BUDGET BLUES? IT CAN HELP )'('SMART ENTERPRISE 19

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