5 Reasons to Take a Look at Your IT Budget and The Future
Information Technology (IT) has become a critical infrastructure that is utilized in small, medium, and large enterprises globally to drive their business processes, growth, and operations. IT systems have previously been used tactically in order to solve issues as they arose, and have operated in the background with a support role. However, as the global landscape has changed and technology has evolved, IT hardware, software, networking, and enterprise solutions (e.g. CRM, ERP, etc.) - that comprise an organization’s IT infrastructure - have come to the foreground and helped to drive company strategies, while becoming revenue generators as opposed to simply being cost-centers. With this change, IT systems came to be used strategically in enterprises - organized, managed and used over the long-term in order to increase efficiency and the bottom line. Thus, a company’s IT infrastructure plays a vital role in supporting both short-term, tactical operations and workflows, and in helping company growth by increasing overall corporate productivity.
In order to complete the above, IT systems must be installed, managed, updated, patched, maintained, and operated correctly, according to strategic plans. Additionally, the high-level, executive business strategy must be written in a way that aligns with the IT strategy - both of which detail the blueprint or roadmap that defines the overall goals of the organization, and how projects/initiatives and business operations will be used to achieve the overarching objectives. Specifically, the latter (IT strategic plan) is used to determine which business projects are viable, and how the IT infrastructure can be used to achieve the goals of the business.
An IT strategic plan is usually crafted by an enterprise’s Chief Information Officer (CIO) and Chief Technology Officer (CTO), in conjunction with the Chief Financial Officer (CFO), Chief Operations Officer, Chief Executive Officer, and other senior-level, C-suite executives. That said, one of the most important aspects of strategically using IT systems correctly (to fulfill the ultimate goals of the enterprise), is to determine an appropriate budget allocation for IT departments and IT systems. However, it is critical for CIOs, CTOs, CFOs, etc. to recognize the quickly changing landscape associated with IT systems and corporate IT solutions.
There are five key reasons why C-level executives and corporate strategic planners should “future proof” their enterprise’s IT budget:
- Legacy Software: Older, obsolete technology systems often become unsupported
- Maintaining Custom Software: Custom enterprise software often requires code re-writes and changes to align with changing business needs
- Evolving Technology Landscape: Advanced technology, like the Internet of Things and Machine Learning are changing the business landscape
- Scalability: Businesses grow, and thus enterprise software must be able to keep up
- IT regulations and legislations: Data protection laws require enterprises to keep abreast of the changing IT landscape and adjust accordingly
Number One: The Technology You Currently Use Will Eventually Be Unsupported
Information Technology systems are a financial investment, thus to maximize their ROI (return on investment), their use must be strategically planned, and their shelf life must be recognized. Specifically, in order to sufficiently integrate business operational plans into an IT strategic plan/IT budget, the use of all components within the corporate IT infrastructure - hardware (e.g. data centers, servers, private cloud servers, computer systems, workstations), software (e.g. Operating systems, Server OSs, Middleware), enterprise applications (e.g. CRM, ERP, supply-chain management), networking systems (e.g. routers, switches, clients, hosts, network servers, storage area networks/SANs) - must come with a timeline. This is because enterprises must understand the significance of legacy systems (i.e. obsolete, unsupported systems) - and the significance of systems that are critical to enterprise operations, but are simply outdated - and consequentially, executives must decide when to upgrade systems.
Difference Between Unsupported and Outdated
Legacy systems are not simply outdated systems, but are systems that are unsupported by vendors, unavailable for purchase, and obsolete. Legacy software and hardware are often kept in businesses because they fulfill a critical need, and are tied to certain operating systems and/or hardware systems. Due to the cost of an upgrade, company executives often determine that upgrading isn’t cost-effective since legacy systems often still work. However, legacy systems not only hinder growth (due to compatibility issues, i.e. being locked-in to older software/hardware system versions), but are no longer patched by vendors, and thus may lack security controls that could negate a costly data breach. With regard to data legislations, the use of such systems often compromises a company’s security posture and their compliance with critical governmental regulations. Additionally, the cost of continued maintenance, that keeps the old systems running - and the lack of newer features that new IT systems typically offer - ultimately makes the use of many legacy systems more expensive. According to the Global 2015 survey of IT leaders and CIOs - which mapped out the IT budgets of several organizations over two years from late 2015 - 55 percent of organizations increased their budget for decommissioning and upgrading their legacy software systems, while 38 percent did not change their legacy-system budget.
Outdated IT systems are non-legacy systems that are old, but still supported by vendors. This means that the systems are still maintained by vendors, and are still patched and available for purchase. While such systems may lack the functionality of newer products, they are typically secure and are not completely obsolete.
The core point here is that obtaining and utilizing the newest IT systems is not necessary for businesses to succeed. New, novel technology products are released for corporate use on a continual basis, so part of developing a flexible, thorough IT budget is knowing which systems are needed for success, and which systems are unnecessary. Additionally, knowing when to upgrade is crucial. For instance, while several industries (e.g. the banking industry) continue to use old, legacy systems for their operations, upgrading could benefit them. However, it is also important to note that using products that are no longer supported (legacy systems) can be dangerous due to the unavailability of vendor-based patches. Systems that have not been regularly patched have often been targeted by crippling malware, such as the 2017 ransomware, WannaCry. Additionally, the minimal use of newer technology means forfeiting the extra functionalities that could give an enterprise a competitive edge over its competition. For instance, utilizing strategic IT differentiation to stand out from the competition is often done by using new technology that no competitor is using.
Number Two: Any Custom Software in Use Will Eventually Need Work Completed
Enterprises often use custom software in order to streamline business operations via customized enterprise suites that are more appropriate for their particular, unique business operations and goals. General, off-the-shelf enterprise software are often bloated with unnecessary modules and suites that do not offer the functionality that is desired. Custom software needs to be maintained, patched, and utilized correctly according to an effective software management plan. Custom software - like all components of an IT system - should be strategically planned to be utilized according to a set timeline, while budgeting for custom software systems should always include updates, upgrades, rewrites, and replanning, according to the evolution of an enterprise’s business model, and supporting a company’s projected and actualized growth.
Upgrades and Rewrites Are a Natural Part of Owning Software
Owning software that is custom-written to meet the unique needs of an organization means the software will require periodic updates to be more efficient in its operations. This means changing code variables, methods/functions, and re-writing comments, etc. Additionally, though maintaining current custom software over the long-term is often more advantageous than adding new features, changes in business operations, goals and objectives might mean that an enterprise’s custom software suites need to be rewritten or upgraded. Regarding the latter, like with legacy software systems, custom software can become obsolete and lose the ability to optimize workflows and provide effective, efficient business solutions. Thus, it is important to recognize the reality of working with custom software, which means that a comprehensive IT budget should always include line-items for adjusting or upgrading such software as needed.
As Your Business Changes Your Software Needs will Change Also
The direction that a business will take can change over time. The changing global landscape, new technology allowing new products/services to be viable, alterations in customer demographics, larger-than-expected growth, etc. may all result in a change in an enterprise’s business model and corporate strategy. A company’s IT software infrastructure must strategically keep up with the changes that a business may undergo. Though no one knows the future, a well-written IT budget should allow for sustainability and support of the enterprise’s IT software and all future upgrades, updates, module-additions, and code rewrites.
Number Three: The Technology Landscape is Changing Rapidly
Technology has evolved at a very rapid pace over the last few decades, and thus, the global ecosystem of corporate technology applications and solutions has changed rapidly over time. As IT systems must be leveraged strategically in order for companies to optimally support their operations, and using new technologies to stay ahead must be planned ahead via foresight, so IT budgets must be “future proofed” to include the adoption of advanced, new IT systems that can be leveraged to support current operations, expand products/services, and/or improve corporate growth. Two major, advanced technologies that have the potential to greatly impact enterprises worldwide include the Internet of Things, and Machine Learning.
Whether it is Machine Learning or IoT The Future Holds Many Great Opportunities
Future technologies hold great potential to businesses and customers alike, on a global scale. Many potential, novel technologies allow businesses to provide new services, or current services in an unprecedented way. Future technologies that can greatly affect businesses include:
- Internet of Things: The internet of things (IoT) is a system that links a great number of objects to the Internet via WiFi-enabled, smart chips implanted in everyday objects. Additionally, with the use of sensors and actuators, the Internet of things allows businesses to obtain data from objects in order to analyze it, and also allows customers to control and manage their devices over the Internet, among other things.
- Machine Learning: Machine learning is a subset of Artificial Intelligence that employs complicated algorithms, along with neural-networks, to allow systems to “learn” via data and patterns, resulting in such systems rewriting their own algorithms in order to gain intelligence and make decisions like a human being. Such systems allow for much more efficient Big Data analysis and AI-based strategic planning.
Other technologies that have the potential to affect businesses include Blockchain technology, Big Data, Cloud Technology, Smart Technology, etc.
If Your Competitors Adapt to New Technology & You Do Not then You Will Fall Behind
In an age of Information Technology, it is crucial for businesses to take advantage of systems that allow enterprises to expand, grow, and to reach customers in new, effective ways. The adoption of IT strategic differentiators can also help set a business apart from the competition. For instance, the use of standard email systems in an age where CRM and ERP suites exist would not allow a company to compete with other enterprises that leverage the aforementioned software for optimal customer-based operations. Conversely, using CRM suites in a standard email-age would allow a company to stand out. It is critical for businesses to plan for the adoption of new technologies via a detailed IT budget, so that leveraging such novel systems can be done smoothly and strategically.
Number Four: If Your Company Grows Then Your IT Needs Will Grow With It
Scalability is one of the most important aspect of corporate strategic planning. Companies grow, such that an enterprise with 10,000 employees will not typically be adequately sustained by the same IT infrastructure that sustained the company in its infancy. Thus, an IT budget must plan for future growth, and include strategic plans to fund and utilize larger-scale, scalable IT systems as needed to match the growth and needs of the enterprise.
SaaS Products Billed Per User
The adoption of cloud technology has greatly changed the way many enterprises do business. One such cloud system, associated with cloud computing, is Software as a Service (SaaS). As opposed to paying for a software product and its license, SaaS denotes enterprise software products that are sold as a service, with routine subscriptions. Such software is centrally hosted by the vendor, and, oftentimes, operated on a per-user model. Such a model bills for every profile that is made to utilize the service, and is related to the per-license model of billing. However, the per-user model doesn’t scale well due to prohibitive cost for an enterprise that has grown to incorporate many more users. Thus, the value of such a system greatly diminishes. The usage of SaaS models that bill clients with overall value in mind as opposed to number of user profiles - thus allowing a business to scale - is preferred, and a corporate IT budget should include the strategic use of such a SaaS system over a per-user billing system.
More People Using More Resources
As companies grow and more personnel are employed, resources need to scale to the company’s growing employee pool and the company’s growing needs. This includes resources associated with the company’s IT infrastructure, which may include hardware devices, power/electricity, data servers, computer workstations, operating systems, etc. It is, thus, crucial for enterprises to craft IT budgets with future growth in mind, specifically with regard to IT-related resources that will need to scale with the enterprise’s growing needs.
Number Five: The Law is Getting Tighter Around Data and Security
Enterprises must do due diligence to ensure that they are using up-to-date IT systems that are secure and will not jeopardize the private data of its customers. Suffering a costly data breach, while not having ensured complete data security - and thus not being in compliance with governmental legislations - often results in costly fines. Thus, it is important for Chief Information Officers and Chief Information Security Officers to craft a comprehensive IT budget with a great understanding of how older/legacy systems - and nonsecure IT systems - may impact their organization. A well-written IT budget is one that includes the strategic, planned use of secure systems, and one that is written with the foresight to recognize that future technology may - or may not be - more secure.
The European General Data Protection Regulation
Several countries have specific legislations decreeing strict rules that companies must abide by, including the United States and Europe All U.S. companies (depending on their industry) must abide by several data and security laws, such as PCI-DSS, Sarbanes-Oxley, HIPAA, among others. For Europe, the EU in 2016 adopted a law (the General Data Protection Regulation) stipulating that companies must do due diligence to protect the data of their customers (especially data that is transmitted outside of the EU), and that citizens have control of their private data, whether that data is transmitted inside or outside of the EU by international businesses.
Future Proofing a Budget Isn't About Allocating Huge Funds
Constructing an IT budget can only be done when company executives understand the true purpose of such a budget. An IT budget is not about simply adding more and more funds into an enterprise’s IT infrastructure - it is about using foresight to effectively and strategically allocate the right amount of resources into different IT system components to ensure that the IT systems are used as optimally as possible in order to help fulfill the organization’s overall goals. Essentially, an enterprise’s IT budget should reflect what the future may bring, realizing that technology - more so than any other aspect of business - is changing at a very quick rate.
As technology rapidly evolves and drives business strategies and critical operations, and while more advanced IT systems are consistently released for corporate use, a detailed, thorough business strategy and IT strategic plan must be flexible enough to accomplish the overall future goals of the organization. Additionally, such plans must be dynamic enough to accommodate the evolving information technology landscape. IT executives must work with financial officers to craft an IT budget that takes the future of technology into consideration, including upcoming novel systems such as the Internet of Things and Machine Learning. This ultimately means that the financial/budget portion of an IT strategic plan must be “future-proofed” and dynamic, while utilizing foresight to include possible future technologies that could change “business as usual.”