Budgets – can’t live with them, can’t live without them!

Aren’t you sick of hearing that 70 percent or more of the IT budget goes to just maintaining what you already have in place?

Many companies seem to think they can save money just by holding on to what they already have. In this week’s expert opinion, Keith Manning makes the case that organizations that rely on old software aren’t doing themselves any favors, especially when “free” updates provide new features and benefits.

No Free Lunch

Sure, nothing in life is free and even these updates can have hidden implementation costs. So it’s easy to say modernize, but maybe not so easy to make the case to the boss that you’ve got to spend money to save it!

But if you’re going to put the effort into optimizing IT, you also need to work on optimizing the IT budget.

Start at Zero

At CFO.com recently, David McCann made the case for zero-based budgeting.  But, the article notes, doing this on an annual basis takes enormous effort and ultimately brings diminishing returns. He quotes Andrew Horne, senior research director for the CIO Executive Board, recommending a rolling cycle.

Basically, you organize your budget process into 12 parts and tackle one per quarter. "It's less work than doing the whole thing annually, but the principle still applies that on a routine basis, albeit every two or three years, you're going back to basics and asking whether your costs make sense," says Horne.

Assess Your Portfolio

As your organization grows, one area in which to derive greater budget efficiencies is application portfolio management, something we talked about last March.

Financial columnist Peter Cohan on DailyFinance recently took a deeper look into how IBM is cleaning its own house. The company, he says, has cut application maintenance spending from 40 percent of IT budget in 1990 to 22 percent today through two key programs: portfolio assessment and portfolio transformation management.

Cut the Ties that Bind

“Are the handcuffs on your IT budget cutting off your circulation?,” asks Dan Burger. If so, he says, try renegotiating your hardware maintenance and software subscription contracts and you just may find a new money tree.

One thing is for sure—your budget isn’t going to manage itself. Figuring out how to manage it, rather than being managed by it, is a key element in forging a high-performing organization.