Social! Mobile! Big data! BYOD! You probably already know what your company's executives most want to see from your IT organization. But unless your company is very new, or you're unusually lucky -- or a very, very good manager -- more than half your time and resources are spent, not on innovative projects, but on "keep the lights on" activities whose sole purpose is to prevent existing systems from breaking down. And sometimes the percentage is a lot higher than that.
"I've seen companies where it's 80% or 90% of the IT budget," says Columbia Business School professor Rita Gunther McGrath, who examined this issue for her book The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business. "I think it should be no more than 50%," she adds.
Most CIOs would agree with her, but can't achieve that 50-50 split in their own budgets. In a recent Forrester Research survey of IT leaders at more than 3,700 companies, respondents estimated that they spend an average 72% of the money in their budgets on such keep-the-lights-on functions as replacing or expanding capacity and supporting ongoing operations and maintenance, while only 28% of the money goes toward new projects.
Another recent study yielded similar findings. When AlixPartners and CFO Research surveyed 150 CIOs about their IT spending and their feelings about IT spending, 63% of the respondents said their spending was too heavily weighted toward keeping the lights on.
Why So Difficult?
If no one wants to spend such a huge portion of IT's funds just to run in place, why does it keep happening? One explanation lies in the term "keeping the lights on" itself: Turning the lights off isn't an option. "It's the ante that allows you to hold on to your job," says Eric Johnson, CIO at Informatica, a data integration company in Redwood City, Calif., with annual revenue of $812 million. "If the systems are down and the phones aren't working, no one will care how innovative you are."
Of course, new projects are very important, so the challenge is to do both. "CIOs are striving to be business executives, truly driving value for the organization," Johnson says. "That's why there's so much emphasis on keeping the lights on while still finding the budget to drive innovation."
A bigger problem has to do with the traditional approach to IT at most companies, where techies who are expected to abide by the principle that "the customer is always right" find themselves creating unwieldy systems in an ongoing effort to give the business exactly what it asks for. Keeping those systems running is usually difficult, time-consuming and expensive. "I've worked with a lot of companies where the CEO says, 'I want you to do this, this and this.' The CIO says, 'That'll be $5 million.' The CEO says, 'Do it for $3 million.' So it's patch, patch, patch," McGrath says. That approach creates "technical debt" -- something you'll have to go back and pay for later -- according to Bill Curtis, chief scientist at CAST, a software analysis company headquartered in Meudon, France, with annual revenue around $47 million.
Similar problems arise when IT tries to satisfy business needs too quickly. "Sometimes these things were built as 'Let's just get something up and see how it works,'" Curtis says. "Things that were designed as a demo suddenly have to grow. Or even if something was designed appropriately for what they thought would be the use, people kept adding new requirements and features until it became a kludge."
Perhaps worst of all is the tendency to customize licensed software in an effort to fulfill business requirements -- whether or not those requirements have any real bearing on the organization's goals or success. "We talk about business capability -- the list of things a business needs to do to be successful and achieve its goals," says Nigel Fenwick, an analyst at Forrester Research. "Out of 30 high-level capabilities, maybe two or three are differentiators." When senior executives understand this well, he says, they encourage IT to focus on those key areas and seek standardized, easy-to-maintain solutions for everything else.