The It Budgeting Process Essay

IT Budgeting Process

Introduction
There are six tips for stretching IT budgets according to Pam Baker which are repurposing the software already owned, managing IT operations more efficiently, reusing old hardware, managed services, automation of enterprise-wide process and leveraging the existing reports for BI (Baker, 2009). These steps have both beneficial and negative effects on both the operational and strategic investment spending in the firm. This article will address the positive and negative impacts for each recommended tip.

Six Recommendations on Stretching IT budgets

The first recommendation is to repurpose the software the organization already owns. This means that IT managers find ways in which they can put into use the existing software to execute a different role without necessarily purchasing new software. It has also meant that the software is deployed across different organizational departments for different purposes. The first advantage associated with this recommendation is that of the cross-functional implementation feasibility. In addition, it lowers the cost of purchasing software. Investment in terms of purchasing new software is therefore reduced. The negative effect of this recommendation is the challenges that come with flexible use of the software since further customization needs to be done to ensure that the software meets the specific requirement of other divisions within the organization. The other common disadvantage associated with use repurposing is the challenge of upgrading. Once software has been customized for repurposing, the upgrade is always difficult.
The second suggestion is the efficient management of IT operations which entails greatly improving the internal process flows in IT departments as well as the staff productivity. Efficient IT operations call for the justification of expenditure and time. This means evaluation of the tasks carried out by the IT staff and elimination of wastes in terms of time and unnecessary spending. There are several tasks that are common and repetitive in nature such as resetting of passwords. It is recommended that such tasks are handled by the customers themselves. By ensuring that such common tasks can be done by various customers other than the IT staff, the IT staff focus on those projects that add more value to the advancement of IT operations. There are several tasks that the clients can do for themselves such as creation of users, deletion of users or giving authorizations of access. Instead of such kind of tasks being assigned to the IT staff, they can be redeployed to the people that use them so that they can do for themselves. This will mean that the IT operations will focus on core innovation projects. Efficiently managed IT operations means better use of existing resources which translates to financial efficiency and great savings. The other economic advantage arising from the efficient operations is the reduced wastages by careful evaluation of the existing processes. Efficient operations always support the idea of continuous improvement which results in innovation and creativity. It is the creativity and innovation that also results in competitive advantage for the company. Efficiency as a strategy has the disadvantage of high staff turnover. As IT seeks to make efficient its operatons, non-performing staff are always laid off to ensure that the gains are maintained. Seeking further efficient operations also results in automation and the elimination of much human interface hence additional layoffs.
The reuse of old hardware is the next recommendation that Baker suggests in her articles and it entails slight modifications to old hardware so that they can function similar to modern hardware. The migration to virtual servers also facilitates this recommendation. Whereas the investment saving associated with this recommendation may seem appealing, the possibility of failure of old hardware and their limited lifespan inhibits the economic advantage in the long timespan. Capability challenges associated with old hardware is the next factor that is likely to impact negatively on this recommendation since some of the old hardware is limited in terms of expansion and upgrading possibilities. Highly sensitive industries like telecommunications give little room for failures and hence the failures that may result from reuse of old hardware. The recommendation therefore might or might not be applicable in different industries depending on the type of technology required in that industry and the impact and cost of failure. The best example is in telecommunications world where every second counts financially throughout the day and night.
The use of managed services has been recommended by Baker. In this the organization outsources non-core operations to other external service provider and focus on their core areas of operations. The first advantage associated with outsourcing is that the organization gets enough focus on primary business focus and as a result gains competitive advantage over rivals since much of the resources are dedicated to the primary objectives and focus. The second operational benefit realized with this arrangement is the ease of globalization. With outsourced services the organization would quickly expand the operations globally by partnering with the service providers with global presence and avoid the costs associated with completely new set ups. The negative impact of managed services is the reduction of direct control where the employees of the second tier company might lack the same concern the primary company has. Such hands-off service provision always results in less satisfaction of customers of the original company seeking the outsourced services. The second negative effect of this model is the possibility of leakage of business information and hence threatens the competitive force of the company. The model might be exploited by corporate spies and information theft especially if no clear legal terms are put in place.
The fifth suggestion that Baker recommends is the automation of processes that cut across the enterprise. There are routine jobs that exist within the organization. Such routine operations can be automated and done in batches hence saving on time and improving the overall efficiency. Faster operations at the sales section mean more revenue is realized. Automated processes mean predictable timelines hence the organizations become reliable and as a result the customers are motivated. Automation of IT services has several benefits in the organization which include increased productivity, efficient use of resources (material and labor) and reduced lead times. The major setback associated with automation is job loss. Because automated processes require lesser working hours, the organization might not need to have the whole human resources capital in the IT section and hence staff layoffs could occur. Financially, automation requires a large capital expenditure in the short run. The benefits of automation outweigh the capital expenditure in the long run.
The final recommendation is to leverage the existing reports for Business Intelligence which entails examining the existing records to see whether the information you need to make the business decisions are already available and just out of sight. This means that instead of investing money in very expensive Business Intelligence tools and software, the management takes an inventory of the existing information before that expenditure. If the information that need is already available the investment won’t be necessary. By careful evaluation of the already existing information, duplication is eliminated and hence saving on investment is made. The negative impact of this method is that it doesn’t give room for creativity since it relies on already existing data. Most innovations rely on ideas that are beyond the confines of the information contained in the existing records. Business operations and strategies such as Business Process Reengineering require that the organizations begin on a clean page and might require different Business Intelligence tools. Leveraging of existing reports might not be applicable in such cases and hence budget might not necessarily be saved.

Conclusion

Whereas the six tips suggested by Baker might have a positive impacting the budgets, IT managers need to carefully evaluate the benefits of each as well as the negative impacts associated with each. Efficient management of IT operations is highly recommended since it will always minimize wastages and lead to improved service provision. Managed services on the other hand, make globalization possible and as a consequence make the business competitive. Examining existing information from existing records and software repurposing reduce duplication and lower expenditure on software respectively. The reuse of old hardware highly depends on the capability of the old hardware and possibility of functioning well in modified state as well as their lifespan. Three of the six recommendations, which are efficient management of IT operations, using managed services and leveraging on the information existing in current records have the greatest strategic, operational and economic potential.

References

Banker, R., Kauffman, R. and Mahmood, M. (1993) Strategic Information Technology Management: Perspectives on Organizational Growth and Competitive Advantage, Harrisburg, PA: Idea Group Publishing
Chase, R., Jacobs, F. and Aquilano, N. (2007) Operations Management for Competitive Advantage, 11th edition, McGraw-Hill
Katz, L. (2000). Technological Change, Computerization, and the Wage Structure, Cambridge, MA: MIT Press.
Quinn, J. (2000). Outsourcing Innovation: The New Engine of Growth, Sloan Management Review, 41(4), pp. 13–28