By the DynaSis Team
In 2013, the CEB (Corporate Executive Board), the world’s leading member-based advisory company, published its 2013–2014 IT Budget Benchmark study, developed from the responses of 165 member organizations. The study found that CIOs are not increasing their spending on innovation, whereas HR, operations, finance and marketing are spending sizeable portions of their budgets on innovative IT projects. (HR departments alone are spending between 6-9% of their budgets on IT innovations, per the study.)
The CEB concluded that these findings indicate IT departments are no longer driving technology innovation to other parts of the business. For the CEB the question then became, "Why are IT departments not budgeting for and controlling these projects?"
The CEB postulated (and we concur) that this shift has occurred because nearly 70% of IT budgets (per the study) are being consumed by maintenance and mandatory (e.g. regulatory) expenses. This "cash crunch" is encouraging already territorial IT departments to reject other departments' pet projects.
While it warms our IT-oriented hearts to learn that marketing, HR and other departments are willing to cannibalize their budgets to implement IT innovations, from iPads to cloud services, this behavior also concerns us. The CEB called the revenue consumed by these expenditures "shadow IT budgets" and estimates that such unapproved projects increase corporate IT expenditures by as much as 40%.
The CEB also determined that some 50% of these expenditures are what it called "unhealthy spending." Unhealthy spending results when projects are not properly evaluated and vetted against a business' overall growth strategy and objectives and/or the risk/reward analysis for the project is inadequate. We've seen unhealthy IT spending among some of our clients that, if not caught in time, could literally have jeopardized the company's trajectory, in terms of priorities and focus.
So, how much "unhealthy spending" are your departments engaging in? How many initiatives have they undertaken without the knowledge and approval of your IT chief? No matter what you think the number is, we're willing to bet it's higher.
To curb shadow (and especially unhealthy) IT spending, our virtual CIOs can perform "project discovery" and help you map all recent and future projects against your business goals and needs. If you bring everyone to the table for a conversation, we can help vet the ideas of your HR, marketing, finance and other departments and quantify the impact of the good ones for IT and executive management. We may also be able to help you reduce maintenance and mandatory expenditures through solid IT practices, freeing up budgets for innovation.
Only when you address shadow IT spending—and accept that these efforts are well-intentioned and can be quite valuable when handled properly—will you reap maximum reward from your technology initiatives and move expenditures out of the shadows and onto the balance sheet.
To learn more, fill out our inquiry form or give us a call.