I am tired of hearing this complaint. Of course there’s never enough money. Everyone wants more money – which is why there’s never enough. US companies are better at cutting costs than they are at growing their businesses, so there’s less money in our companies to do anything meaningful. The government has already spent itself into oblivion – screwing our kids in the process – so there’s no money there for essential things like healthcare and education. Many of us have huge mortgages so we don’t have enough money for even modest vacations or college tuition for the same screwed kids.
Technology budgets are always under attack. Most of these budgets have little or no discretionary room to maneuver. So when the boss says “what about that Web 2.0 stuff? What are we doing there?,” most CIOs and CTOs tell them “we’re looking at it,” knowing full well that they only have enough money to put out the daily brush fires – and nothing more.
Exacerbating the shortage of cash, operational technology – infrastructure, PCs, laptops, PDAs, cell phones, messaging, and the like – is expected to cost less – every year. After all, everything’s a commodity, isn’t it? And everyone knows how flat the world is.
Let’s talk about guerilla budgeting.
First, if I’m a CIO or CTO, I’m not telling anyone how my investments distribute across my operational versus strategic priorities because I can’t draw a clean line myself, and because I want to make sure that I don’t create a budgeting target the CFO might lock on to. In fact, I need to protect whatever discretionary latitude I have because I need to be strategically – not just operationally – responsive to the company’s requirements.
Since I can’t draw a clean line between all of my strategic and operational projects, I will push all of the gray area projects into the strategic category. This will insulate them from the cold of commoditization and the expectation that “this-should-be-cheaper.”
I will also campaign for new strategic projects with the senior management teams of the enterprise and the lines of business. This is marketing, pure and simple. I need to convince them that I can help them solve some of their most pressing problems like, of course, cost management, but also customer service, cross-selling, up-selling and anything that leads to profitable growth.
If I’m a really good salesperson I can convince them to pay for the new initiatives as add-ons to my budget. These should be sold as special projects with pilot phases that provide enough information to determine if a major initiative makes sense. These are classic win/win’s since I get more money to invest in strategic projects and the business feels good about using technology to solve major business problems.
I’m also going to squeeze my vendors so tightly that they cough up cash all over the floor – if they want to keep my business or want new business from me. The strategic pilots that I do for the lines of business should be at least partially subsidized by vendors with vested interests in the outcomes.
A rule of thumb is 10% of the eventual project cost, where a $10M project would have a subsidy value of $1M. After they stop crying, they will accept the terms. Of course, the quid pro quo is that if the project escalates to full value, the subsidizing vendor will get the deal.
I am going to create some major incentives for my people. I will develop some payback metrics that require ideas to have at least a 3X return. If one of my team can save me a ton of money in the delivery of operational technology, for example, then I will pay them a bonus equally one third of the savings. The reverse equation would apply to generating revenue. This will require internal service level agreements (SLAs) with my own people, but it could be well worth the effort. I would only pay them when the savings or revenues are realized. Try this and watch what happens.
I am also going to think about my own top line. How can I make money with technology? What can I sell? If I have excess computing and communications capacity, I might try to become a re-seller. There is precedent for this. Companies have been providing services to other companies for years. Even expertise is re-sold, especially in the area of architecture. In a previous life, I bundled architectural and database management expertise into consulting offerings that I sold to non-competitors. While my internal people always had lots to do, they were able to find a few days a month to consult for a share of the fees. They also learned a lot by working outside of the proverbial box.
These steps might help technology budgeting. Think about them; try them out.
Now if we could only find a way to shrink the federal and trade deficits. Does anyone know some smart people that might look at these problems?