Wednesday, 13 September 2006

Best Practices in IT Spend Effectiveness Results in Faster Growing Budgets

A research study by Ventana confirms rigorous management of IT operations leads to more effective IT spending. Companies that take this approach also have had the fastest growth in IT budgets over the...

The study 'Unlocking the Value of IT' by Ventana Research confirms rigorous management of IT operations leads to more effective IT spending and revealed that companies that take this approach also have had the fastest growth in IT budgets over the past three years. Moreover, CIOs in companies with more effective spending practices also had greater influence in setting IT budgets than those that did not.

Almost all large companies have implemented more stringent IT governance practices over the past five years, but their focus has been on hardware and software purchases, not operations. Ventana Research found that consistent use of disciplines such as IT portfolio management, asset management and having spending visibility are critical to getting the most bang for the buck.

“Too often, companies focus almost exclusively on their IT capital budget and do not pay enough attention to management practices that we believe would enable many of them to save at least 5 percent of what they are spending on day-to-day activities, support and maintenance contracts and so on,” observed Robert Kugel, who directs Ventana Research’s Financial Performance Management practice. “CIOs that employ these sorts of best practices are rewarded with faster growing budgets and greater control of them.”

Companies that manage IT operations effectively have detailed visibility into their spending and use objective data consistently report more effective use of their IT budgets:
Companies that manage IT operations effectively have detailed visibility into their spending and use objective data consistently report more effective use of their IT budgets:

• Companies with real-time visibility: projects and performance metrics rated their IT spending effectiveness 64% higher than those that did not.
• Companies with a formal application review process: they rated their spending effectiveness 22% higher than those that do this on an ad hoc basis.
• The Pay Off: IT departments and the CIOs that lead them are rewarded for using corporate resources wisely. Companies that spend their IT budget more effectively reported faster budget growth over the past three years than those that did not. CIOs in companies that spend their IT budget effectively have much greater influence on setting the IT budget than those that do not.
• The Key to Effective Spending: companies with well-defined processes and fact-based metrics consistently reported a higher level of IT spending effectiveness than those with less well-defined processes.
• The Difference Between Good and Great: IT managers think they are doing the right things but the study revealed there was a wide gulf between their perceptions of their processes and the details of how they actually worked. CIOs must ensure all of the right processes are in place and that people are accountable for their performance.
• Make IT Governance Operational: the research confirms the commonsense assertion that companies that are able to track their IT costs very accurately spend their budgets more effectively than those that cannot.