Where Does Your IT Budget Go?

According to an MIT Sloan Center for Information Systems Research Study, the average firm spends 71% of their IT budget on running current systems and some blow as much as 80% of their budget keeping the status quo.  What if you could reduce this to 50-60% of the IT budget?

That’s what can be achieved over time according to “IT Savvy” by Peter Weill & Jeanne W. Ross.  Being obsessed with Fixing What’s Broken, Building a Digitized Platform and Exploiting the Platform for Profitable Growth is how they describe the IT Savvy firm.  Within the book, they outline the journey of becoming IT savvy as having four stages:  Localizing, Standardizing, Optimizing  and Reusing.

While only 2% surveyed have attained the Reusing stage, these firms enjoy a 20 % higher profit than their competitors and have an average IT budget that is 145% higher than the localized stage IT department.  What makes the Reusing stage distinct is that they continuously improve, are business agile and introduce product innovations.  They use IT strategically.   To tell where you are in the process, you’ll want to benchmark unit costs and compare yourself to competitors. The appendix of IT Savvy has a questionnaire to also help determine your current stage.  For construction firms metrics you may want to purchase CFMA’s Information Technology Survey, or peek at Intel’s performance measurements in their Information Technology 2008 Performance Report.

You may also want to read a recent global CIO study which states that “half of CIOs are expecting to implement completely standardized, low-cost business processes [over the next five years]”.  Their visionary plans include business intelligence & analytics, virtualization, risk management & compliance,  and business process management.  The CIO pragmatist enables corporate vision, makes working together easy and concentrates on core competencies.  This all happens while 14% of the CIOs time is looking for ways to cut costs.  Where do you spend your money & your time?