Justifying the IT Budget for 2003

In the second category, the business units, not the CIO, should be the ones making the justification. Ideally, all new initiatives in the IT budget that directly support new strategic priorities and plans of specific business units should have a business sponsor who is prepared to step up and defend that strategy to senior management - and to justify the IT initiatives that support that strategy. If the business sponsor fails to convince senior management, then those IT initiatives should disappear from the budget. IT should not be pushing business-benefiting initiatives without a business sponsor. Countless failed IT projects and wasted IT investments have taken place when this occurs, and we would strongly advise CIOs not to include any such initiatives in their IT budget. CIOs can and should work with business partners to identify technology solutions that can help business partners achieve their goals - and Giga has published ample research on how CIOs can be successful in these persuasive efforts. But, the business units should be ones that justify these investments, not the CIO.

In the third category, the CEO should be the one making the justification. These are investments that benefit the enterprise as a whole, rather than any specific business unit. Some of these investments may be essential ones to protect corporate assets - such as the Year 2000 compliance initiatives in 1998-1999, or the security upgrades and disaster recovery initiatives that have risen in importance since the Sept. 11, 2001, terrorist attacks. Others are investments in which there can be cost-savings for the enterprise as a whole by making a single, centralized investment instead of multiple, often duplicative decentralized investments. The job of the CIO is to build and document the case for these investments well in advance, present that case to the CEO and other relevant senior business leaders like the CFO, the general counsel or the head of corporate auditing, and convince these executives of their importance. Any initiative of this kind that does not have CEO backing and support should not be in the IT budget. At the same time, the CEO should not serve as the executive sponsor of any of these initiatives, assuming they are approved for the budget. CEOs make lousy IT initiative sponsors - they have too many other priorities to devote adequate time to being a project sponsor, they are generally too far from the day-to-day business to provide effective project guidance and it is a rare (and lucky) CEO who can be successfully challenged by underlings when his or her ideas are wrong or off base. Instead, an executive from the business unit that would benefit the most from the enterprise initiative should serve as the project sponsor, with a mandate to represent the interests of his or her colleagues from other units.

Companies need to remember that the IT investment budget (both business and IT categories) is an investment fund and needs to be managed as such. This means that all the best practices of investment portfolio management need to feature in how that budget is managed:

Most IT departments do not currently have the financial know-how to manage investments in this way, nor to ensure the necessary rigor in the management of the recurring budget. Large IT departments should seriously consider the creation of an IT financial controller position to help do this, or if this is not feasible, they might negotiate a half-time resource from corporate finance. Although many controller profiles do not have the creativity of investment portfolio managers, they bring much more knowledge and experience to the table in value measurement (for example, which metric(s) should be used? ROIROI, ROE, ROA, EVA, etc.). They can also help ensure consistency in investment evaluation and prioritization so that apples are not compared to oranges when making project selection decisions. Alles zu ROI auf CIO.de