IT Value vs. IT Cost: Make it a Math Problem

Lorne Michaels, the legendary creator of Saturday Night live, once said, “It’s just as hard to make a bad show as it is to make a good show.” IT is similar in the sense that it can cost just as much money to do IT wrong as it can cost to do it correctly. You must align your IT projects, goals, and needs with overall business objectives in order to maximize the value of your IT department.

Value is defined by how much IT spend helps meet business objectives, or in mathematical terms, how much of “x” dollars spent on IT equates to “y” dollars of increased company revenue. The problem with most IT departments is that they don’t have a budget or a plan; without either, the value of IT is intangible.

Many IT departments are too busy concentrating on the cost of projects and seeking purchase approval, which ultimately leads to an IT department that is focused on just keeping the lights on—rather than innovating. Cost will always be part of the IT equation, but strategic budgeting, communicating with executive leadership, and aligning projects and purchases with business objectives can eliminate the obstacles that get in the way of getting a project off the ground.

And for those who think IT should be focused on keeping the lights on, you are absolutely wrong.

Modern business success requires innovative technology and a team of professionals who understand the value of implementing that technology to generate real, measurable business results. When IT leaders realize this, their departments will become a leading value-add department within your company.

IT leaders need to understand how to present their spending to executive leadership. The primary objective is to have defined business objectives for the year and a budget for IT that correlates back to those objectives. The IT leader needs to be the one that asks executive leadership what is the business trying to achieve? How much money does IT have in order to help achieve those goals?

In short, when IT has a full understanding of the business objectives and how much money they have allotted to help, a strategic budgeting plan can be created. If the available funds are not sufficient to accomplish the business objectives, the IT leader can communicate that to executive leadership with context. Once a budget is finalized, IT can put together a project list, with specific costs, directly related towards the budget. That will take away the need to “ask” for money on a project by project basis.

Once the “ask” is taken away, IT projects can be articulated by the value that they bring, not by their cost.

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