|
All over the map. That's where you'll find the practices, policies and executive mindset on the conflicted, sometimes baffling process of IT budgeting.
For most of IT, the budgeting landscape, particularly in the midmarket, still reflects an unstructured, let's-see-if-this-works mentality. In our latest round of CIO Habitat research, we asked 240 CIOs, IT executives and industry experts to characterize how much IT budgeting differs from one enterprise to another. An overwhelming 94.4% said these processes are "totally different," while the remaining 5.6% found "some variance from place to place."
One seasoned midmarket CIO, who has worked in eight organizations over the course of his career, confirms the broad spectrum of today's IT budgeting approaches. "The approach to IT budgeting is one of extremes: top-down, bottom-up, zero base, flat year-to-year or reduced by an arbitrary percentage," this CIO says. "Budgeting for most organizations is treated as a necessary annual function. When budgeting is viewed as a strategy -- not an annual goal -- it can be a means to competitive advantage."
In that context, the budgeting process should also serve as a communications forum for aligning IT with business needs.
Three Budgeting Practices
Ken Cohn, CIO of Pepco Holdings Inc. in Washington, D.C., identifies three factors that drive the differences in IT budget practices from company to company. The first is the current state of IT with respect to technology. If IT isn't keeping pace with industry advances (such as vendor software releases, operating systems, hardware and security), Cohn says, "the best expenditure of IT dollars is to catch up. It makes relatively little sense to build a strategy of alignment with the plans of business units if the platform upon which that strategy is built is ready to collapse."
The second factor is the top-down view of alignment between IT and the lines of business. "If the CEO views alignment of IT expenditures with the plans of the lines of business as key to driving the corporation ahead, then the CIO would be foolish to plan expenditures otherwise," Cohn points out. But to achieve alignment, the IT department has to be well-versed in the company's strategic plans as well as in the business plans of the various divisions, he adds.
The third factor has to do with IT's push for innovation beyond the infrastructure, those keeping-the-lights-on decisions. "These might well begin with leveraging off of existing technology such as an ERP platform all the way to showing the way to process improvements based around, but not on, IT tools," Cohn notes.
A diversity of practices is not a bad thing. What is bad is that few organizations have IT budget processes today that run smoothly (see "Budget Practices in Transition," above), and that has very real performance implications. Numerous executive research studies have shown a direct correlation between organizations that are highly satisfied with existing IT budgeting practices, IT performance and business performance. Conversely, organizations with poorly orchestrated budgeting practices are rarely considered high-performing enterprises.
|
 |
|
|
