IT Budgeting: Managing the Cost and Value of IT

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In this Issue

In this issue:
Sunday, April 1, 2012 - 00:00

"By running a more or less consistent survey each year, we have the opportunity to not only ‘take the pulse’ of the budgeting activity in the current year, but also to acquire a longitudinal view by comparing the current year’s results with the past."

-- Joseph Feller, Editor

Welcome to the final issue of the 2012 volume of Cutter Benchmark Review. As the year draws to a close, I'd like to take the time to thank Managing Editor Cindy Swain, Production/Editorial Manager Linda Dias, Production Editor Tara Meads, Cutter Consortium President and CEO Karen Coburn, and VP Anne Mullaney for all their hard work in making CBR a rigorous, relevant, and trusted tool for IT business decision makers. Most of all I want to acknowledge the value created by our contributing authors who shared their insights and experiences with our readers this past year: Dennis Adams and Cutter Senior Consultant Mike Sisco (IT trends 2012); Simon Woodworth and Rohan Beckles (managing the mobile enterprise); Federico Pigni, Elisabetta Raguseo, and Zubin Dowlaty (real-time data); and, finally, Dennis Adams (again) and Cutter Fellow Bob Benson who join us for this issue.

CBR surveys often investigate emerging, bleeding-edge technologies and practices, but one issue each year (this installment) is very different, as it offers us a regular returning look at a perennial issue: IT budgeting. One of the key strengths of the annual IT budgeting issue is its historical perspective. By running a more or less consistent survey each year, we have the opportunity to not only "take the pulse" of the budgeting activity in the current year, but also to acquire a longitudinal view by comparing the current year's results with the past. This is our seventh IT budget issue, and I think you'll agree that our authors have made good use of the seven years of data to provide exceptional insight into where we're coming from, what we're doing now, and where we might (or should) be going as we move ahead.

Consistency is only one strength of CBR's budgeting issue; the other side of the coin is diversity. In every issue of CBR, we recruit a team of two expert authors -- one drawn from the research community, the other from the practitioner side -- who collaborate to construct a survey around a key IT trend or concept, and then share their expertise to help us make sense of the results. Above and beyond the individual expertise of the authors, what makes CBR particularly useful is the authors' diverse viewpoints, which help us in understanding the data from multiple perspectives. This issue is no exception.

Our academic author is Dennis Adams, an Associate Professor in the Department of Decision and Information Sciences in the C.T. Bauer College of Business at the University of Houston (USA). Dennis is a long-time CBR veteran, contributing to CBR's annual trends and budgeting issues since the beginning. He is also a contributor to various other Cutter publications, and his research on business leadership and the value of IT has been widely published in the some of the most prestigious journals in the IT discipline.

Dennis argues that budgets "reflect beliefs about the future of an organization." He delivers an insightful article that uses our survey data to give us a good grasp on where we think the future is taking us. Dennis opens with a quick return to basics by addressing the key question that must precede any budget decision: what do we mean by IT? He then answers the question by breaking IT down into four types of systems (i.e., money-making, cost-saving, compliance, and infrastructure). To my mind, this is a very useful exercise, since different strategic and operational thinking underpin each type of IT, different economics help set up governance processes, and so on. By not treating IT as simply a "big black box," Dennis is able to extract some interesting lessons from this year's data.

Building on this perspective, Dennis is able to make some provocative points about (1) the historical trend toward growth since 2009 and the need for deeper ties between IT and business management; (2) managing costs through consolidation and outsourcing; and (3) managing IT value in competitive environments. Dennis acknowledges, and I agree, that both our survey data and outside indicators suggest a bumpy ride ahead -- even if it is a slow, bumpy ascent rather than a descent. With this in mind, he wraps up his article with some solid advice, returning our focus to the core issues -- where does a firm want to go strategically, and how should IT be resourced to support those goals?

Our practitioner author is Cutter Fellow Bob Benson Like Dennis, Bob is a recurring contributor to the CBR budget series (as well as many other Cutter publications). Furthermore, he brings along over 40 years of academic and corporate experience to assist companies and government agencies with understanding the business value of IT, strategic and financial IT management, strategic IT planning, effective IT application development, and IT governance.

Bob approaches the survey data from a very different point of view than Dennis. Rather than looking through the lens of the IT system (i.e., Dennis's four categories), he divides up the data based on the management structure of the IT competency. Specifically, he looks at how budgeting approaches and trends differ between "corporate" structures (where IT is managed centrally for the whole company) versus individual "business-unit" structures.

As with the academic article, Bob's lightweight analytical framework delivers some interesting results. In his article, he examines the various ways in which business-unit IT groups behave more like service businesses and explores the implications of this regarding both the cost and value of IT. Bob goes on to look at the increased scrutiny IT receives through formal governance structures as well as the assessment of IT value across our survey population. Just like with Dennis's contribution, Bob's article is at its heart a back-to-basics appeal, calling for firms to think about IT as a service business that needs to manage costs carefully and measure value even more carefully.

I am confident that all our readers will benefit from the data and analysis in this issue. Together, our authors have given us keen insight into both the current practice of the IT budgeting discipline and the underlying assumptions that inform IT budgeting practice, as well as a solid "big picture" understanding of both the past and the future.

ABOUT THE EDITOR

This issue is the seventh installment in our annual series on IT budgeting. Together, our authors have given us keen insight into both the current practice of the IT budgeting discipline and the underlying assumptions that inform IT budgeting practice, as well as a solid "big picture" understanding of both the past and the future.