Leadership - Funding IT

Establishing budgets and funding for company initiatives have to be some of the most challenging business discussions. It probably feels like every department is being squeezed to provide more toward the company’s growth with shrinking resources. This is where conducting business as an e-Business organization truly shines. Department leads need to focus on two critical areas: creativity and collaboration. Teams that collaborate across the firm obtain greater leverage of existing corporate knowledge as well as resources that exponentially improve each division's initiatives. Departments or divisions that operate in isolation become a burden to the company over time, drawing down resources at substantially faster rates than those groups that collaborate and interoperate.


IT and the IT organization can play a pivotal role in taking collaboration to new heights.  IT is the infrastructure behind a firm's e-Business success. The IT organization is also the management and maintenance of the infrastructure that supports the e-Business.  Some would argue that IT is the business-enabler, and without them the business would flounder until it failed. While IT is not the only component that makes a business successful, technology does provide the ability for transactions to be executed whether in the form of a sale or as accounting and everything in between. With so much riding on the shoulders of the IT group, how can the team ensure it has the funds necessary to execute on its initiatives?


Similar to how your personal cash flow impacts your consumption opportunities and behaviors, IT funding impacts the opportunities of the group as well as the opportunities of the entire organization. IT spending must balance cost efficiencies and innovation with supporting business strategies. This is precisely why the IT governance body needs to ensure that all of the IT initiatives support the overall business goals and objectives. IT must deliver the functionality and services in-line with the current and planned needs of the organization so that the firm can accomplish what it aims to do today and in its strategy plans.


There are three ways for a firm to fund IT: User Discretionary, User Mandatory and IT Pays.  User discretionary allows the users to dictate what tools and assets will be acquired to support their business needs.  From a user perspective this is good because they can use tools they are familiar with and optimized for their specific role. However, from a business perspective, there couldn't be a worse idea.  When users or other teams decide on IT assets that meet their needs they fail the business on several points: loss of technology standardization across the company, constrained investments in shared infrastructure and high probability of lack of interoperability, and the loss of technology investment alignment with business strategy.


The user mandatory funding model is also known as a technology charge-back. In this funding model, the IT group makes all the technology purchases and then charges users or departments for the operations and support.  The IT systems become more standardized, but the standardization is not comprehensive, slowing down emerging technology implementations. In addition, users are limited in their tool selections and might not be given the best tools for their job function.


The IT pays funding model supports IT control of technology acquisitions. It is different from user mandatory in that the IT group focuses exclusively on the IT systems. The benefit of this model is that it supports a highly standardized IT organization. The drawback to this model is that it chokes out innovation.


All three of the IT funding models need to be blended to obtain the optimal funding paradigm.  For example, IT pays would be the ideal solution for the data center environment where users have little understanding of the complex hardware and software in this part of the business.  Users should have a voice in the tools they need to be most efficient in their roles, so User discretion funding, with some guidelines from IT, would work at the business application level.  In terms of the physical infrastructure and what functionality it needs to be able to support such as video conferencing and mobility, the User mandatory funding model fits nicely.  Users can collaborate with IT to identify the technologies needed to support today's business as well as enable the business strategy roadmap going forward.


All three of the funding models, then, are blended to maximize benefits for all parties as well as the business. The blended model also encourages collaboration between divisions as well as between departments and IT, driving increased creative solutions that benefit the entire company, not just a single group. In addition, the IT governance board, in its role as aligning IT and business strategy, defines the standards that must be adhered to, to ensure that the three funding models blend smoothly and completely.

 Have a great weekend and we will discuss defining key performance indicators next week.

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