While information technology investments have traditionally been the province of IT departments and organizations, that dynamic is shifting considerably as more and more businesses undergo sweeping digital transformations. With digital activities no longer confined to a specific department or area, but instead permeating the entire fabric of a company, it is now business units rather than IT that are more often taking charge of technology spending. According to recent estimates from Gartner, enterprise spending on technology will effectively double by 2020 as a result of business-unit-based investments carried out in large, digitally transforming enterprises (Forrester’s term for this phenomenon is “business-owned technology spending”).
The technology spending gap.
It’s not surprising, however, to discover that this shift in responsibility for technology investments is not without its challenges. In fact, the transition is serving to highlight what Forrester analysts refer to as “the technology spending gap”; that is, the longstanding schism between technology investments and business requirements where, historically, technology decisions were made with ambivalent business backing, and business decisions were made without fully taking into account associated technology considerations. This rift has spiraled into a situation that many large enterprises are familiar with, one wherein IT units are unable to successfully demonstrate the value or impact of technology investments through rigorous metrics, and as a result, are frequently left out of high-impact business decisions. In many companies, it is not unusual for IT and business units to be completely siloed.
Technology decisions = business decisions
However, this separated state of affairs can no longer hold up under the pressures of digital transformation. One of the primary tenets of the digital revolution is that digital technology is not something detached or apart from the business; instead, digital technology is the business. As such, it’s no longer a question of making technology decisions, but a question of making business decisions.
But for executives who have historically been cut off from IT, knowing which technology investments will add value to a company and which are a waste of resources is no easy task. Enterprises may want to increase technology spending in order to capitalize on digital business opportunities, but without a history of technology decision-making, they run the risk of diverting resources to opportunities that do little to advance the company’s strategic agenda or of missing important chances to leverage business-owned technology spending to create effective improvements and transformation across the enterprise.
How IT investment councils can help.
To address this lack of IT expertise on the part of business leaders now responsible for making technology spending decisions, many enterprises are employing committees known as IT investment councils or IT governance councils to help their decision-makers maximize outcomes and value and minimize waste when it comes to technology spending. To ensure the success of these broad goals, IT investment councils fulfil three main functions:
- Ensuring investments support overall business strategies
Sound technology investments must align with both broad business goals and the strategies developed for accomplishing those goals; today, technology spending that does not fulfil a strategic business function is wasted spending. That’s because new technologies are integral to the changes happening at scale in digitally transforming enterprises, and as a result, the technologies a company chooses to invest in are an important part of the narrative the company is creating about where, when, and how it is progressing toward its goals. IT investment councils help ensure that technology spending is enabling a company to tell the story it wants to tell by carefully assessing the key questions of whether the company is spending the right amount on IT, and whether those resources are being spent on the right IT.
- Demanding high-quality proposals
Proposals for technology investments can no longer get away without justifying themselves in relation to business outcomes. Today, technology spending proposals must be able to present a sound business case, leveraging established business metrics to provide measurements of how investments will impact strategic business objectives and to assess the level of associated risk. Investments that cannot delineate their outcomes in terms of business performance have no value whatsoever to a company; instead, they are a liability diverting critical resources from higher-quality projects. IT investment councils help businesses set a high standard for proposals and effectively weed out those that are simply a waste of time.
- Rejecting projects with a high risk of failure
According to surveys, approximately 20 percent of technology-supported initiatives will end in failure, and that percentage goes up as projects become larger and more complex. Fortunately, unsuccessful projects commonly show unmistakable warning signs of failure even before the project has been implemented. An IT investment council’s job here is to recognize those warning signs, and ensure that projects with a high chance of failure do not make it past the proposal stage.
While IT investment councils can be enormously valuable to companies in helping guide technology spending decisions, it’s important to note that this does not mean that the role of the IT investment council is to run the IT unit. The council’s job is purely an advisory one (i.e., they rank, recommend, and approve investments), but it is the CIO that remains in control of handling IT’s day-to-day budget.