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Who’s driving IT budget spend?

  • The bulk of maintenance spending is overseen by central IT and the push for innovation comes from separate departments.
  • Cloud solutions are reducing the cost associated with hardware maintenance and upgrades which dominated central IT budget.
  • If central leadership isn’t driving IT innovation – outlying departments will adopt shadow IT systems to meet their needs.

In this age of disruption, how can businesses balance the IT budget between innovation and necessary maintenance?

In understanding the driving force behind IT spend, we need to realise that first up, it’s not a question of “who” but “what”. What drives the distribution of the tech budget are the business’s needs. As far as the tech required to deliver services to suit the business’s needs is concerned, it’s a balancing act between two categories: maintenance and innovation.

people sitting in office

These two major focuses of IT spend often create a set of opposing forces in the organisation. The bulk of maintenance spending is overseen by central IT and the push for innovation comes from separate departments and lines of business. There’s a term for this type of division, “bimodal IT”, which was touched on at Gartner’s Application Architecture, Development & Integration Summit in July 2016.

At first glance, you can see how this happens – it’s central IT’s job to keep the lights on, “business as usual” going, and existing services running. However, as service delivery systems grow more complex, the simple task of keeping things running also grows in complexity. When all of central IT is occupied keeping the plates spinning, it leaves other branches of the business to work out their own service delivery solutions.

What needs doing

Enter the innovation side of IT, vital to the survival and growth of any business. A company needs to innovate to stay ahead, grab that first-mover advantage, and best serve its customers. Major shifts in the technological landscape, such as IoT and cloud-based services, are pushing everyone to remodel their organisation, especially through IT expenditure allocations. Traditionally, hardware maintenance and upgrades created a substantial annual cost to the central IT budget, but architecture solutions offered by cloud are changing that.

The head of sales at ICT-provider SG Technologies, Alistair Whittaker, points out that basing your services in the cloud means “there’s a lot less capital expenditure and a lot more operational expenditure”. Going with a cloud service means a business pays a subscription fee to its provider, forgoing hardware costs and reaping the benefits of operational scalability. SG Technology’s Managing Director, Dave Gair, adds that “moving forward, say the next 36-60 months, we’re seeing businesses really value that fixed cost every month”.

Customer preferences are also becoming more diverse, pushing for more innovation-based spending. The founder of bespoke software developor, Solentive Technology Group, Kareem Tawansi, notes that today’s end-users expect to be able to access a business’s services through “multi-conversational channels”, meaning they want to be able to interact with customers through almost any means of communication. Examples include using a chat bot or speaking to a natural language processing program such as Amazon’s Alexa, on top of apps and web portals, or directly through an IoT compatible device. If the customer requires it, the business requires it.

Who needs to do it

After getting an idea of what requires funding, we get to the second force behind IT spend: who. Tawansi believes corporate IT funding will be grasped by those aiming to innovate. “If you have a business unit that wants to do something new, you know they’ll find the way,” he says. 

“If you have a business unit that wants to do something new, you know they’ll find the way” 

Kareem Tawansi, Founder and Chief of Innovation of Solentive Software

“And [central] IT hates it, and I understand why IT hates it, but they’ll get the money because if they don’t, they’re not going to get the first-mover advantage. They can’t just sit there and wait for IT to go, ‘OK, well this is how it’s going to integrate in our existing system’.”

But even with the push from the periphery, it takes strong leadership from a company’s core to deliver successful IT solutions. Tawansi, Gair and Whittaker all agree that building and integrating innovative solutions requires a consistent vision to guide each project from start to finish – and this usually falls to the Chief Information Officer or Chief Technology Officer.

Not only do they have to balance the budgeting demands of IT’s two main tasks, they also have to pull off the timing of transitions as well. Innovation pushes the business to keep up with tech’s breakneck speed, while maintenance pulls timelines back to allow the organisation a chance to consolidate gains, work out the bugs, and keep existing systems in order as they transition to the next iteration.

Whether implementing a new model or improving an existing one, timing is crucial. A central figure is usually best positioned to guide the process as a whole, and decide how to meet both needs at any given moment.

Telstra Consulting can help you cut through today’s technology options to make the right choice for your business.

Find out more

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