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Justifying IT Spend
- 1. How to Justify Your IT Spend dotCMS Boot Camp 14 April 2010 Better
- 2. If you are looking for… …in advance, I apologize
- 3. Equations are just guides Every organization has a… Different approach to justifying costs Different risk profile Different processes/culture from one college to another, or one division to another Today – a framework, based upon what I see in the market, conversations, experiences
- 4. Following this presentation you will be able to… Gain or maintain credibility with your CIO/CFO Move Strategic IT Spend Requests Quickly Put your vendors on BS alert
- 5. Today What Should Be Included in Every Justification Approach Focus is on Strategic purchases Visit the ROI Temple This one is too hot, this one is too cold. And this one is just… Two other quantitative approaches And now, for something totally different..
- 6. The Checklist S/W Purchase Implementation People, Training Infrastructure (Servers, Network)
- 7. The Big Picture – Hardware & Software Strategic/Drive innovation Using Social to inform content selection Transformation WebTrends, Radian6 Information Transactions Marketing Automation Tactical/Reduce Costs Infrastructure CMS, servers
- 8. The Big Picture - People W-OPS Web Operations Ensures that the tactics of Web site development align with overall organizational mission. WEM Web Execution Management Day to day execution by the Web Team; the Web Team carries out plans developed by Web Ops. WPM Web Performance Measurement Web analytics that are connected to business goals
- 9. The Big Picture - People W-OPS Web Operations Ensures that the tactics of Web site development align with overall organizational mission. WEM Web Execution Management Day to day execution by the Web Team; ability to efficiently carry out intended plans WPM Web Performance Measurement Web and business analytics RFI for the Web Team? Who re-interviews?
- 11. What counts – hardware, software, incremental headcount, training costs, facility drain, the Team’s preparation time
- 12. What doesn’t count – “opportunity cost”, 20% of someone’s time is now freed up
- 13. “Return” = tangible, verifiable
- 14. Revenue
- 16. The Failing of ROI A Strategic Purchase doesn’t… Save you money Reduce headcount Simplify processes By itself, make you money
- 17. Next Time ROI Comes Up Usually an organization commits to a Strategic purchase to complement a larger, business decision
- 18. What’s Being Used #2 IT Spend:Operating Expenses Reflects more of the realities of the ebb and flow of an organization As it enters new markets, sells subsidiaries or mirrors a contracting market Does not assess the upside of an investment
- 19. What’s Being Used #3 Total Cost of Ownership Originally created to capture long term and “hidden” costs Acquisition/Operation/Growth and Change Does not assess the upside of comparative investments But does surface financial risk during the latter stages of an investment Some companies abandoning ROI for TCO because TCO represents harder costs
- 20. What’s Being Used #4 RORKAS (Return on Running a Kick Ass Site) A completely qualitative approach to justification (sort of) IT investments are largely forced by business decisions
- 21. What’s Being Used #4 RORKAS (cont’d) Is your site the most important visual manifestation of your school/agency/business? By what degree does your site lag your business? 3 Hours? 3 Weeks? 3 Months?
- 22. What’s Being Used #4 RORKAS (cont’d) Your “return” looks something like this Ability to correct embarrassing content in 10 minutes, not 3 days Make the most of your current business opportunities because someone is tasked with daily review of site and business analytics Nail new business opportunities (launch new products, services) because you have a cross functional team that can create a new application, modify templates, write copy in something less than 3 months
- 23. What Can You Take Home? Justification is what you make it Can be ROI IT Spend:Operating Expenses TCO “Hey, just imagine how better the New World will be!” An RFI for the Team?
- 24. Be Real About Costs People WILL spend more time on the site (great!) Your investment is the cost of running a better machine Technology, people, training, 3rd party involvement and organizational support
- 25. A Word about “Risk” Needs to be addressed in every justification What is Risk? Identifying executional risk, and how will those deltas be managed? Recognize risk when you… Buy new – does the investment take you outside of your orgs comfort zone? Remain with legacy – a different risk. Risk to the business of staying with suboptimal processes, speed, accuracy, security. Who is mentoring, pushing responsibility and ownership to the appropriate levels within the organization?
- 26. Thank You! Bill Beardslee bill@dotcms.com +1-786-594-5288
Editor's Notes
- Putting together a case on why an organization should purchase something – something that costs a lot of money now and in the future – can be one of the most nerve-wracking events of a career. It takes a lot of research and good deep thinking to not only position your recommendation for approval, but in the process make it shine brighter than all the other proposals on the table of the CIO or CFO.
- But the process of justifying your IT spend does not involve one universal, neatly-defined equation. Amidst my own personal experience in this area, the many conversations and research I have done in preparation for this presentation, I could not find one commonality in approach – nonetheless in an equation. Indeed, there are maybe dozens of approaches I have seen for justifying IT expenditures – each with its own set of pros and cons.
- And why are there so many approaches? I believe it has to do with the different DNA of each organization. Sr. management varies from one org to another, and with that so to does the way an organization approaches the entire justification process. Some organizations I will review later in the presentation are driven by extreme standardization of process – meaning there is a template and standard scoring system for each internal IT spend proposal. Others are less rigid about the construct of the proposal and more concerned about Total Cost of Ownership. Neither of those approaches is “right” or “the best” – but they work for each organization. You find something that fits the needs and culture of your organization and go with that.Today we will discuss a number of different methods being used, and importantly find out what you are doing and add that to the conversation.
- So this presentation and the conversation that surrounds it should broaden your understanding of the pros and cons of what is being used out there. Again – you may not leave here with an equation, but you will leave here with greater confidence reinforeced by your knowledge of the many ways to justify your IT spend. Your improved capability to get to the nails of costs, risk and ROI will help improve their pitches to you…or help you more quickly separate the fakers from the real folk.
- Strategic - usually ones over a certain dollar amount, and those that will create process or headcount ripples through the org
- First lets make sure we have the right list of items to be included in any request for funding.
- Lets take the Checklist we just reviewed and dissect that to a more granular level. Most organizations will make a distinction between Strategic IT purchases and Tactical IT purchases. Strategic for some is defined in dollar terms. For other organizations – and I feel more appropriately – it is defined as a purchase that will change the way the organization does business. This could be a subtle change or a potential game changer. Also Strategic purchases tend to carry with them more risk. Strategic purchases push orgs into areas where they have incomplete knowledge or experience – and thus that is why they tend to draw more scrutiny from mgmt.
- The most prominent missing link in many IT spending proposals is a recognition of the people. Not that headcount is not considered. No one would make that obvious of a mistake in their presentation. But they tend to account for them like servers – “yep, we need 5 people”. Very little recognition of how those 5 skill sets may fit within the Web Team, or within the larger org. If you are about to move toward a strategic IT investment, don’t forget to re-think how you would organize your web team.
- The technology goes through a lengthy and in-depth pre-purchase vetting process – budget request (internal), evaluation, demos. But how often does an org look at its own people and how/if they would fit within the new strategy that was the impetus for the new technology? Should the team be re-interviewed or evaluated to see if they have the skills and capabilities to be contributors in the new reality?
- Your site is the visual manifestation of your businessAnd does the evolution of your business ever stop? Does the generation of ideas around your business have a project manager, a project period that starts and stops?
- You are selling the transition from your current state (outdated, feature-thin CMS, staffed with fewer people than needed, infrastructure sucked dry of follow-on investment because “we are going to buy a new CMS soon”) to a state that puts the site at the forefront of your business (a CMS implemented properly, a group of people empowered, and management that has funded a “Perpetual Plan”). This only works if your leadership believes in the power of online.