How Can CIOs Avoid Wasting Their Budget?

It's all too easy for a CIO to overspend when it comes to technology
It’s all too easy for a CIO to overspend when it comes to technology Image Credit: Kevin Simmons

It is the role of the person with the CIO job to make sure that their company has access to the technology that everyone needs in order to do their job most efficiently. However, this is where things can start to get a bit complicated. We work very hard to find ways to acquire the technology that the next project is going to need because of the importance of information technology. However, if we are not careful we can end up buying too much of what we no longer need or simply buying the wrong things. What steps can a CIO take in order to avoid spending their budget buying technology that will just end up going to waste?

Where Is The Money Going?

Let’s face it, our companies spend a lot of money on technology. The result of all of this spending is that we end up wasting a lot also. We all know that this happens for all sorts of reasons. CIOs can be chasing the latest shiny new thing. Or perhaps they misunderstand what their consumers want. All too often they end up building something new rather than buying off the shelf. Whatever the reason, the likelihood of the person in the CIO position making spending mistakes is greater than ever. Companies are scrambling even faster for new tools in part to accommodate people rushing to work from home. Worldwide IT spending is forecasted to reach $3.9 trillion this year, up 6% from last year.

Currently everyone’s seeing CIOs causing digital acceleration, but very few organizations are tracking what they’re getting in terms of business outcomes. The big question that CIOs are facing is trying to determine where people are wasting money. The answer is that CIOs are not using business metrics to influence investment. Instead, they’re doing what people tell them to do. What CIOs need to do is to take a step back from their spending. They need to carefully look at what their company’s needs are. Then they need to look at their current spending plans and try to determine if they are meeting the company’s needs.

The CIO is Spending Too Much On The Cloud

There’s no hiding it: everybody knows the benefits of the cloud. We can achieve lower infrastructure and storage costs and the technology is improving all the time. But many CIOs end up spending way too much to make the move online – because they don’t realize just exactly what the shift entails. Organizations that lack plans to track and monitor cloud costs can end up overspending by an average of 40%.

Basic services in the cloud do continue to decrease in price, and by being moving your company’s IT infrastructure to the cloud you can take advantage but this does not happen automatically. Where CIOs can run into problems is with poor planning. When moving into the cloud many CIOs simply move all of their software online as a whole so it can operate in the cloud instead of on the company’s servers without modifying it. The problem with doing this is that if software isn’t modified, it may run all the time and draw on cloud resources needlessly which can run up big usage costs.

The CIO Misunderstands What The Customer Wants

CIOs will make spending decisions based on what it seems customers want without realizing that their assumptions may be off base. A good example of this comes from companies that have assumed that their customers would use PayPal if they offered it as a payment option. Based on this assumption, the CIO will hire a systems integrator to add PayPal into their e-commerce platform and end up spending at least US$80,000. However, what happens then is that they discover that only a small portion of the company’s online payments come through PayPal. The reason that more customers don’t use Paypal is because PayPal isn’t a one-step process. When using PayPal customers have to click “buy,” fill out their payment information on the PayPal platform, and then go back to the company’s site to complete the transaction.

The CIO Builds Software Instead Of Buying It

CIOs need to understand that creating tools like a website or app from scratch can cost hundreds of thousands of dollars. This, of course, leads to the question of just exactly why do so many companies build software instead of buying it off the shelf? There are many reasons for this and in some cases it is company politics. In businesses that have strong technology capabilities, the CIO who oversees the company’s technology may push to develop new tools or services in-house instead of buying them. CIOs need to understand that a complex business doesn’t require complex tools. Taking the time to tweak your own internal processes while adopting off-the-shelf technology is the more scalable solution for your business.

The CIO Is Hanging On To Outdated Systems

Some CIOs struggle because they can’t keep up with every new trend. The result of this is that they end up sticking with old technology when it isn’t cost-effective anymore. A key metric for CIOs to look at is the average utilization of their data centers. This can be as low as 27%. One of the biggest problems in technology is that you’ll have CIOs who will continue to throw good money after bad money in this way. CIOs need to realize that planning and monitoring is an important part of ensuring that a technology solution will meet business objectives. CIOs need to ensure that they understand what their own concrete business goals are before moving forward with any software implementation.

What All Of This Means For You

Money is what allows an IT department to function. As the CIO, you are in charge of determining where the department’s budget gets spent. An IT department is a complex machine that has a wide variety of needs. The existing systems have be keep running and new technologies have to be evaluated and potentially implemented. It can be all too easy for a CIO to make spending mistakes and end up wasting a large portion of their budget. We need to be aware of just what kind of spending mistakes we can make.

CIOs are struggling to find out where they may be wasting money. As more and more workers start to work from home, a great deal of spending is happening in order to create an infrastructure that can support this deployment. CIOs have balance the company’s needs against where the IT funds are going. CIOs can easily end up spending too much to move into the cloud. Applications that are not modified to run in the cloud can easily end up costing too much. CIOs have to carefully listen to what their customers want. If they misinterpret a request, then they may implement unneeded functionality. Not all project have to be created – CIOs need to first look to see if a solution can be purchased off-the-shelf. CIOs may also be hanging on to older systems longer than they should. This could result in a big budget drain.

One of the challenges with being a CIO is that there is always so much going on. When it comes to determining where our budget is currently going, we can be hard pressed to stay on top of all of our projects. CIOs need to allocate the time to take a careful look at everything that they are currently funding. We need to understand who is going to benefit from each allocation of budget and if it turns out that this is not a good use of our limited funds, then we need to stop the spending right now.

– Dr. Jim Anderson Blue Elephant Consulting –
Your Source For Real World IT Department Leadership Skills™

Question For You: What the best way to measure the value of a moving into the cloud project for the company?

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What We’ll Be Talking About Next Time

Now that we are all living in the 21st Century, everyone wants to stay in contact with everyone else all the time. The good news is that because of the importance of information technology, there is a wealth of tools that are available to the modern CIO to make this happen. The problem that we are all facing is that it can be very hard to determine which tool everyone should be using. We need to get our teams to use the same tool or else we’re going to have a communications mess on our hands. Given all the choices that we have, what is the right solution for our company?