Strategic Plan, Business Alignment, and Governance

How does having a strategic plan, business alignment, and governance help you in reducing IT costs? Base your annual budget on an IT strategic plan that outlines the projects and priorities aligned with the business. The plan provides context for the budget numbers and gets support behind the vision and overall direction. To reduce costs, go back to the strategic plan and agreed-upon priorities to determine the impact. See what the business is willing to give up or defer in the strategic plan.

A strategic plan that is properly aligned with the business and approved through a well-defined governance process is a superior alternative to what will happen without it, which is endless, unfocused arguing. During times of economic pressure, it is even more important for a company to have a strong and disciplined methodology for the submission, approval, and prioritization of projects. This will help the organization focus on what is important, even if priorities shift due to cost pressures.

The best way for a CIO to get project money is to have the business areas that benefit from the technology ask for the money. (Infrastructure investments are exceptions to this rule.) As a result, business executives would be requesting funding for business projects. Be sure the organization views projects as business projects, not IT projects. Verify that every project has a business sponsor. The most convincing argument for an IT investment comes from business sponsors who stand up for the funding request, identify how it will help their part of the business, and explain how they will generate the business return and value.

Make sure you have a strong process in place for feasibility analysis and project justification that identifies all the costs. Without sounding redundant, an effective governance process for prioritizing project requests is a key foundation for effective IT.

Communicating Budget Cuts

Many of us have been there and have painstakingly developed a detailed budget from the ground up with perfect detail and understanding. Then the CEO or CFO tells you to reduce the budget by 15 percent by Monday. You scramble to adjust numbers. The problem is not going back and realigning expectations with business management on what services or projects you will need to cut to meet the cost reduction goals. By tying yourself to unrealistic expectations, you create a losing proposition before the year begins.

Top Tip: Manage like you are the CFO

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"PIan and manage your IT budget like you are the CFO. Be prepared to have your budget cut. Plan for this by understanding the line item details and the relationship to the company's goals and objectives. Remove the emotions and stick to the facts. The job of the CIO is to provide good information so the organization can make informed decisions."

—Trent Buness
3 Wire

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Always prepare your budget with multiple options and proposals, and include scenarios with recommendations. That way, when instructed to cut the budget, you already have a plausible scenario ready for presentation and a clear account of what services the decision makers are eliminating or reducing.

During the year (or at budgeting time), if you realize budget cuts are necessary, communicate the targets for reduction to both the business executives and the IT group. Enlist assistance from both business executives and IT to identify the best way for the business to meet the necessary IT budget cuts.