Shadow IT – systems and solutions sourced outside the direct control of the IT organization – is often presented as a threat or even a surprise to the CIO. However, shadow IT is often created by CIOs who lack the necessary IT budget or resources to participate in new business technology initiatives, according to Gartner, Inc. This presents a unique opportunity for IT asset managers to assist CIOs with digital business.
“Without a new approach, CIOs and their management teams can struggle to pay off life cycle technology debts left by failed or superseded digital technology initiatives,” said Stewart Buchanan, research director at Gartner. IT asset managers must help CIOs select the most sustainable digital business initiatives, which will attract enough funding to cover their full contract or asset life cycle costs.
“Digital business implies an evolving financial relationship between an organization and its end users, one that involves a new IT business model that will be fraught with risk until new governance processes mature to guarantee adequate life cycle funding,” said Mr. Buchanan, “IT organizations cannot afford to be exposed to additional digital business costs that cannot be covered by traditional IT budgets, which are already under pressure.”
To help IT asset managers best manage these challenges, Gartner has developed a three-stage IT asset management (ITAM) engagement plan for digital business.
Stage 1. Establish an early role in digital business initiatives to ensure that all the costs of scaling successful projects can be covered
Acting in an advisory role on every technology procurement and risk management assessment will make CIOs far more influential than running a few digital business initiatives at their own financial risk. They should aim to become digital risk mitigators, leading a team that everyone in the business wants to consult for help and advice on digital business initiatives. As business managers struggle to control digital technology costs and maximize success rates, ITAM skills and life cycle planning experience will become more valuable and sought after.
IT asset managers must help business leaders learn from their mistakes, even if the business initiatives prove successful. A successful digital technology initiative can prove even more dangerous than a failed one, as software licensing costs to process and store data from the Internet of Things could grow exponentially. A dramatic upturn in unforeseen demand can prove even more expensive to satisfy at short notice. Supply costs rise, unless negotiated as part of the initial deal. Worst of all, there may not be enough money in the allocated budget to meet demand.
Stage 2. Manage life-cycles to ensure that digital business costs are funded beyond the initial investment
Despite being expected to promote digital technology by business users, experienced IT managers are selective because they have a more realistic understanding of the long-term costs, risks and benefits of technology. Whether acting as an internal service provider or a broker for external providers, the CIO and the ITAM team will be reluctant to buy more technology than they can sell on to business users in return for budget or another form of cost recovery, such as chargeback.
IT asset managers can help their CIO select digital business initiatives that will attract enough funding to cover their full contract or asset life cycle costs. Financial sustainability does not depend on the initial return on a digital business initiative. It depends on the organization’s willingness to continue spending for as long as contractual commitments or business dependencies persist. IT asset managers must also help CIOs adapt to the need for shorter, more flexible contracts, where available, to deliver short-term digital initiatives, as well as to time the migration to lower-cost commitments for those that prove successful and can be made viable in the long term.
Stage 3. Share financial risks with business sponsors and external providers to ensure they are committed to paying
CIOs need to develop new funding methods before they can hope to access the digital technology elements in every business budget. IT spending on digital technology is at risk because business users are often better negotiators than the IT service managers who depend on them for funding. Direct engagement with suppliers ensures that the business sponsors behind each digital technology initiative will cover their costs.
IT asset managers understand where long-term business costs are being created, costs that cannot be covered by short-term cost recovery. A frequent problem arises when business users want a monthly consumption price without a long-term commitment to pay for specialist assets, which would take the IT organization or an external service provider many years to amortize. Another common example is where short-term services create data that must be retained forever, or at least for many years (sometimes indefinitely in the event of a litigation hold).
CIOs should determine how best to share these costs with the business by identifying who should “own” the IT organization’s assets. A common strategy is to encourage lines of business to run pilots and experiment with digital innovation, ready for the CIO to scale and industrialize them when they prove suitable for longer-term adoption. As a result, CIOs can control and manage these services without ever taking ownership of their contracts or assets.
More detailed analysis is available in the report “CIOs Should Let IT Asset Managers Win Them More Budget Until Digital Business Governance Improves.” The report is available on Gartner’s website at http://www.gartner.com/doc/2734917.
Gartner analysts will discuss how CIOs and IT asset managers can cut IT costs and grow digital business at the Gartner IT Financial, Procurement & Asset Management Summit 2014, to be held from September 17-18, in London, and September 8-10 in Orlando. For information about the Summit in London, please visit http://www.gartner.com/eu/itam. For information on the Orlando event, please visit http://www.gartner.com/us/itam. You can also follow the event on Twitter at http://twitter.com/Gartner_incusing #GartnerITAM.
About Gartner IT Financial, Procurement & Asset Management Summit 2014
In an age of digital business, CIOs and business leaders are looking for rapid solutions with which to develop new business strategies and initiatives. This Summit will explore the tools and strategies needed to mitigate risk in an expanding digital world. Gartner analysts will identify how to optimize costs through vendor management and negotiation programs, and how to maximize the value of existing investments while maintaining compliance and protecting against audits.