CIO Strategies: Tackling The Hurdles
IT budgets: A case for business
IT budgets won't be a challenge for CIOs who can communicate
well about the business benefits. And here's how organizations prioritize when
funds are limited. by Brian Pereira
Traditionally, pitching for IT budgets has been a big challenge for CIOs. Planning
for IT is now treated like any other business activity. Appealing for funds
is no longer perceived to be a difficult task, if there's a strong business
case for it. About 28 percent of the respondents in the Network Magazine survey
said inadequate budgets & prioritizing is a challenge for them. But the
CIOs we spoke to do not regard this as a challenge. They said IT funds are available
if top management can see the business benefits.
"The period of tightly controlled budgets is over and restricted budgets
are no longer a problem faced by CIOs," asserts Mani B. Mulki, General
Manager (Information Systems), Godrej Industries Ltd. "Top management became
quite tech savvy in the last 2 - 3 years. They know the benefits that a technology
can bring [to business]. Now CIOs don't have to fight to get funds for ITthis
is a joint decision that is taken like any other business decision."
Now that IT and its benefits are acknowledged, the CIO can focus on learning
about the various technologies and how his business can leverage on these. With
this knowledge in hand, it then becomes a matter of clearly articulating it
all to top management when proposing a budget.
The important thing here is communication. The CIO should be able to convince
top management that bringing in IT will help the business in certain ways. Take
Information Security for instance. Many organizations give this low priority
in terms of spending. But if a CIO can communicate the risk of not having good
security architecture, top management would surely understand the consequences.
Of course, ROI is expected within a certain period, and this has to be communicated
upfront. After all, investments in IT are made keeping the business benefits
in mind. So a CIO has to do sufficient planning and analysis, and be sure about
the benefits, whether tangible or intangible.
"For us budgets has never been an issue if we are able
to show ROI in a reasonable period of time. We have been able to show the value
and benefits it brings to the business. The groundwork has to be thorough. So
a CIO starts screening what projects he should take or drop. We also don't take
too many initiatives at one time. Every year we try to adopt one initiative.
We can't make unreasonable demands to management for funds," says Jason
Gonsalves, General Manager, IT & Costing, Goodlass Nerolac Paints.
The other issue with budgets is that they are either under- or over-utilized.
If funds are exhausted long before the year winds out, asking for more could
pose a challenge.
Going by Network Magazine's Infrastructure Strategy surveys, 2002-03 witnessed
under-utilization of IT budgets. But 2003-04 saw many organizations exceed their
initially defined budgets. IT budgets are usually planned at the beginning of
the year, but organizations often overspend before the year is over. That means
CIOs in some organizations would press for additional funds during the course
of the year. This calls for some flexibility and planning when allocating funds.
"Budget allocation has to be flexible. In a given time period, some projects
need to be taken up to meet business urgency or some other requirements, say,
a security threat to the operations, which is detected during the course of
the year. This is met by providing a certain percentage of the total budget
for contingencies," says V.K. Ramani, President (Information Technology),
Vijay Kumar Magapu, CIO and Executive Director, Larsen & Toubro Infotech
Limited, says funds always seem to be limited as new projects or extensions
are encountered during the course of the year.
"Funds are always limited. However, funds are rationed whenever intended
use is perceived as a cost. It is therefore incumbent on any fund seeker to
highlight and credibly promise to deliver value to the company in excess of
funds deployed. That is, funds should always be sought as part of wise investments.
In case of information technology, wise investment takes the form of two lines:
One hopes that the investment may increase the capacity of the company in new
ways; secondly, and more often the case, it pertains to the realization that
many investments are needed if only to keep the systems in the organization
from getting outmoded, archaic, and therefore leading to loss of value,"
Companies like LG Electronics India go by the yearly budget concept. However,
spending is closely monitored and the budget is reviewed quarterly.
Normally, the IT budget at the beginning of the year should be adequate. But
additional funds may be required midway, if there is bad planning, or if some
unforeseen incident/emergency calls for a significant business initiative that's
dependant on IT.
Whatever the case, the additional budget allocation has to
be justified by corresponding business benefits.
But what happens when it is a policy not to allocate additional funds during
First things first!
In organizations where budgets are constrained, IT managers allocate funds for
projects on a priority basis. And these priorities depend on the nature of the
Air-India (AI) is a service-centric business. The management generally agrees
to the budget proposed by the IT department. But when funds are limited, priorities
are given to infrastructure that directly supports customer services.
"In case of fund limitations, the priorities will be to augment resources
for our customer service applications running on mainframes, where the loads
have shown a steady increase and are at present touching more than two million
transactions a day, on one mainframe alone. Currently, AI owns a bank of five
mainframes hosting passenger and cargo service applications that are operated
on 24x7 basis," says S. Mukerji, Director-IT (O), Air-India.
LG Electronics India (LGIL), is a manufacturer of consumer electronics products.
So communication networks and infrastructure maintenance are given high priority.
The National Stock Exchange runs a mission critical business so downtime should
be minimum. NSE.IT gives importance to on-going maintenance and administration
in key areas such as core business applications, critical enterprise-wide applications,
and security set-up. These are regarded as "high priority" without
"For new initiatives, higher priority will be assigned to capacity optimization
by deploying stringent standards to manage within given budgets," says
C. Kajwadkar, Sr. Vice President - NSE.IT Limited.
Ramani of UTI Bank says his priorities are directed at the business and operational
needs. "New projects are kept on hold, unless there is a compelling reason
to invest. Sometimes an ongoing project is shelved if the delay is not critical,
and the budget is utilized for other immediate requirements."
Once the business priorities are clear, it is easier to allocate funds for different
areas of IT. And when top management is convinced that certain IT initiatives
have paid off (read ROI is realized), then getting funds for similar initiatives
in the following year does not become a big issue for the CIO.