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Historical approaches to IT funding and the mechanisms used to prioritize and track technology spending do not support the changes that new technology initiatives require.
Most organizations realize that digitization means change. Not just to products and channels, but also to operations – especially in IT. But there is one change that many organizations have ignored: Digitization requires a new approach to funding IT.
CIOs are shifting focus from projects to products. In product-based IT teams, staff, and processes are organized to deliver and constantly improve a set of product lines that enable Business capabilities and outcomes. At the same time, CIOs are ramping up IT’s speed and flexibility using agile, DevOps, and continuous delivery practices, and they are building new technology foundations such as API platforms and cloud-based infrastructure.
But historical approaches to IT funding and the mechanisms used to prioritize and track technology spending do not support these changes. Project-based funding creates rigidities and delays because it is tied to annual budgeting processes and cannot accommodate the iteration and uncertainty associated with digital investments delivered as products. Additionally, IT spending currently comes from both the CIO’s budget and Business area budgets, but the two are not coordinated or aligned to a common strategy. At the same time, many business leaders still don’t fully understand IT cost drivers, so they make arbitrary IT budget reductions.
Efforts to make IT faster and more flexible will be undermined unless CIOs also rethink technology funding. There are five actions to take to change IT funding in support of digitization.
Develop a true enterprise-wide view of technology spending: Business leaders are taking greater ownership of technology decisions as technology becomes the primary driver of business growth. However, most companies have limited visibility into business-led technology spending, resulting in duplicative and siloed investments. CIOs should promote efforts to track enterprise-wide technology spending by highlighting the benefits of better coordination and prioritization. The most successful CIOs position these efforts as a way to take full advantage of greater funding, not as an attempt to curtail “shadow” IT.
Align funding to product lines and empower product teams: As IT shifts focus from projects to products, so too should funding. Product-line funding means continuous investment rather than specific start and end dates.
