As we end the year, I want to discuss a phenomenon that came up during the fourth quarter at several information technology organizations I have worked with – an abundance of cash.
Either through extra funding directly allocated to an IT department or funding allocated through a PMO, many organizations found themselves entering September/October with new found financial resources. Budget surpluses occur annually in many organizations; however, I have not seen it as prevalent as this year. When fiscal year’s come to a close (often coinciding with a calendar year), many technology leaders struggle with the challenge of utilizing all allocated budget.
Simply providing IT with funding late in the year does not provide the enterprise with the ability to make lasting impact or to innovate. In fact, it may actually have the opposite effect.
There are many reasons why providing last minute funding negatively impacts an organization:
- Schedule – Contrary to popular belief, Information Technology organizations like to follow a process when completing projects. Whether leveraging an agile methodology, a more traditional waterfall approach, or a hybrid project management approach, IT groups rarely go out and build a solution without some level of planning. Giving the IT group sufficient budget to build a system does not work if sufficient time to build the system does not accompany the budget. Brookes’ Law extends on this principle in several dimensions including the harm caused by throwing resources at a project to meet a timeline.
- Quality – When multiple projects are crammed into the fourth quarter of a fiscal year due to surprise budget, quality suffers. Most organizations do not have the ability to digest the additional budget / project from many other dimensions including: change management / training, project management, quality assurance / testing, and transition to the operations team after the system goes live.
- Capital Expenditures aren’t what they used to be – IT has changed the way it spends money. With transition to the cloud, fewer and fewer organizations are investing in large capital technology purchases (think servers, switches, firewalls, storage appliances, etc.). Now more than ever, if a CIO is tasked with spending an extra $5 million dollars, it is very unlikely the money will be spent purchasing hardware.
- Reputation – IT groups have enough perception issues without the added pressure of last minute, well funded projects with unrealistic timelines. Most IT executives rather deliver a quality product in a realistic timeframe than deliver a subpar product on an accelerated timeline.
The real reason organizations end up in the Ample Budget Conundrum is that many times, IT does not have a seat at the table during the strategic budget planning process. Most IT executive teams put together budgets based on needs (normally based on prior year spending) but they are not invited to higher level conversations around how the business is performing in order to get insight into possible extra capital. Such insight would allow the IT organization to better serve the enterprise.