Are We Investing In The Wrong Projects?

IT Departments are currently spending 41% of their budgets on simply managing infrastructure, the findings from a recent research paper from the Cloud Industry Forum[1] (CIF) found…  That’s a remarkably steep percentage – undoubtedly, far higher than it would be in an ideal world. In many ways, it’s a confusing statistic, too.

In 2020 should IT really be investing such a significant proportion of their budget in managing what is essentially the plumbing that underpins the applications and services that deliver value to their business.  The same research does show that 67% of organisations surveyed have increased the number of IT projects they are undertaking which is a positive sign that IT is making changes which is reflected in the statistic that 69% of IT Decision Makers see the digital transformation revolution as a great opportunity for their business.

Faith in digital transformation for making big IT changes?

On the face of it these are positive responses.  We are spending a high proportion on managing our infrastructure but we are investing in change so we must be acting on our faith in digital transformation and making big changes with all these new projects.  Unfortunately, when we dig a little deeper, it becomes apparent that we aren’t really transforming at all.  56% of respondents report they are undertaking infrastructure upgrade projects, 40% are investing in networks, 35% planning migrations of existing estates and 24% are upgrading legacy applications.  In other words, we are still investing our time, effort and money in creating a stable platform.

Whilst any of the goals sound worthwhile: “modernisation of the legacy”, “cloud migration programme”, etcetera, the reality of these projects is rather more mundane.  Initiatives like these often amount to little more than “lift and shifts”.  Organisations are taking what was once on a data centre and dropping it into the cloud with little or no refactoring or consideration of the benefits, or indeed the costs, associated with public cloud environments.

This is ‘transformation’ in name only. Much like endlessly raising the foundations on a house without ever actually constructing the building, organisations become trapped in a cycle of trying to maintain infrastructure, or in a cycle of shifting the location of legacy apps.  IT justifies these sorts of projects as a necessity before the ‘real’ transformation can begin; but true transformation, in many cases, never gets the chance to begin. IT ends up losing sight of innovation. ‘Catch-up’ or ‘survival’ mode takes over and, because of this, the spending on managing and maintaining infrastructure remains at 41%.

IT isn’t entirely to blame for this situation. IT knows that its role is to innovate, but on such limited budgets, this can seem nigh on impossible. The answer, in part, lies in addressing the issue of budget.

CIOs regularly blame CFOs for using financial risk as a reason for not approving projects. But CIOs often neglect the fact that they can leverage the conversation around ‘risk’ to their advantage. After all, CFOs are some of the most attuned individuals to the reality of risk but the lens they use for risk is different to that often adopted by IT.

CFO Business case

Winning project approval from the CFO involves making a clear business case about what an organisation’s digital transformation will deliver in concrete terms.  Digital transformation projects need to focus on an ambitious vision that will move the needle for the organisation and, ultimately, increase revenue or reduce costs.  The wider vision may require updates to the infrastructure, but these should almost be incidental changes and not the primary reason for a driver.  If we in IT change our perspective and focus our projects on transformative change, we will be able to update infrastructure as we need but if we focus first on infrastructure, we will often not make the transformational steps.

IT needs to be prepared to take risks.  We will often see not upgrading the infrastructure first as a risk but the CFO will regard not changing the business as a bigger risk and so IT must change their perspective.

The coronavirus situation has really proved that point – IT budgets can be increased when the conversation around risk changes.  IT have been unleashed in many organisations because the CFO has seen that the changes have been necessary to allow survival.  Business led risk assessment has created incredible change, not technical risk assessment.  Organisations have pivoted entire business models driven by business risk assessment and whilst the circumstances are extreme, the principles are valid for review.

Racing car manufacturers have designed and are producing breathing aids, clothing manufacturers are making medical masks and scrubs, engineering companies have invented entirely new ventilators, and the NHS is transforming its IT systems to ensure critical medical equipment is available to the most at-risk facilities. Organisations are transforming at a rate we have previously never seen. And it’s all because, suddenly, the conversation around risk has changed; it’s no longer a case of ‘can we afford it?’ for businesses, but ‘how can we afford not to?’

In other words, while IT’s predicament might seem hopeless, it does have an ‘out’. Business transformation is a risk, and for IT to move forward, CFOs need to understand how the benefits outweigh, and even mitigate, the risks.  IT has a great opportunity now but is it incumbent on IT to see the opportunities and to describe these opportunities in business risk and reward terms.

[1] The Changing Role of the IT Department – Cloud Industry Forum 2020