Justifying IT Spending

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How to Justify Your IT Spend dotCMS Boot Camp 14 April 2010 Bette r

description

This presentation examines some of the more common and unconventional ways of justifying IT spend in businesses and higher ed.

Transcript of Justifying IT Spending

Page 1: Justifying IT Spending

How to Justify Your IT Spend

dotCMS Boot Camp14 April 2010

Better

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If you are looking for…

…in advance, I apologize

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Equations are just guides

• Every organization has a…– Different approach to justifying costs– Different risk profile– Different processes/culture from one college to

another, or one division to another• Today – a framework, based upon what I see

in the market, conversations, experiences

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Following this presentation you will be able to…

Gain or maintain credibility with your CIO/CFO

Move Strategic IT Spend Requests Quickly

Put your vendors on BS alert

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Today

What Should Be Included in Every Justification ApproachFocus is on Strategic purchases

Visit the ROI TempleThis one is too hot, this one is too cold. And this one is

just…

Two other quantitative approaches

And now, for something totally different..

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The Checklist

S/W PurchaseImplementationPeople, TrainingInfrastructure (Servers, Network)

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The Big Picture – Hardware & Software

Strategic/Drive innovation

Tactical/Reduce Costs

WebTrends, Radian6

CMS, servers

Marketing Automation

Using Social to inform content selection

Transactions

Information

Infrastructure

Transformation

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The Big Picture - People– W-OPS

• Web Operations• Ensures that the tactics of Web site development align with overall

organizational mission.

– WEM• Web Execution Management• Day to day execution by the Web Team; the Web Team carries out plans

developed by Web Ops.

– WPM• Web Performance Measurement• Web analytics that are connected to business goals

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The Big Picture - People• W-OPS

– Web Operations– Ensures that the tactics of Web site development align with overall

organizational mission.

• WEM– Web Execution Management– Day to day execution by the Web Team; ability to efficiently carry out

intended plans

• WPM– Web Performance Measurement– Web and business analytics

RFI for th

e Web Team?

Who re-interviews?

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What’s Being Used

#1 ROI Direct “return” compared to the direct “cost” of the

purchase

o “Cost” = Tangible, verifiable costso What counts – hardware, software, incremental headcount, training costs, facility

drain, the Team’s preparation timeo What doesn’t count – “opportunity cost”, 20% of someone’s time is now freed up

o “Return” = tangible, verifiableo Revenueo Cost savings

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What’s Being Used

#1 ROI (cont’d)One time, perpetual, shape of the curve?

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The Failing of ROI

• A Strategic Purchase doesn’t… – Save you money– Reduce headcount– Simplify processes– By itself, make you money

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Next Time ROI Comes Up

Usually an organization commits to a Strategic purchase to complement a larger, business decision

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What’s Being Used

#2 IT Spend:Operating Expenses

– Reflects more of the realities of the ebb and flow of an organization

– As it enters new markets, sells subsidiaries or mirrors a contracting market

– Does not assess the upside of an investment

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What’s Being Used

#3 Total Cost of Ownership

– Originally created to capture long term and “hidden” costs– Acquisition/Operation/Growth and Change– Does not assess the upside of comparative investments– But does surface financial risk during the latter stages of an

investment– Some companies abandoning ROI for TCO because TCO

represents harder costs

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What’s Being Used

#4 RORKAS (Return on Running a Kick Ass Site)

A completely qualitative approach to justification (sort of)

IT investments are largely forced by business decisions

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What’s Being Used

#4 RORKAS (cont’d)

Is your site the most important visual manifestation of your school/agency/business?

By what degree does your site lag your business?3 Hours?3 Weeks?3 Months?

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What’s Being Used

#4 RORKAS (cont’d)

Your “return” looks something like this– Ability to correct embarrassing content in 10 minutes, not 3 days– Make the most of your current business opportunities because

someone is tasked with daily review of site and business analytics– Nail new business opportunities (launch new products, services)

because you have a cross functional team that can create a new application, modify templates, write copy in something less than 3 months

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What Can You Take Home?

Justification is what you make it– Can be ROI– IT Spend:Operating Expenses– TCO– “Hey, just imagine how better the New World will

be!”

An RFI for the Team?

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Be Real About Costs

• People WILL spend more time on the site (great!)• Your investment is the cost of running a better

machine – Technology, people, training, 3rd party involvement and organizational

support

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A Word about “Risk”

Needs to be addressed in every justification– What is Risk? Identifying executional risk, and how will

those deltas be managed?– Recognize risk when you…

• Buy new – does the investment take you outside of your orgs comfort zone?

• Remain with legacy – a different risk. Risk to the business of staying with suboptimal processes, speed, accuracy, security.

– Who is mentoring, pushing responsibility and ownership to the appropriate levels within the organization?

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Thank You!

Bill [email protected]+1-786-594-5288