Forecast 2013: Building a better IT budget

Smart IT executives are carefully constructing their budgets for 2013 with both cost-cutting and business growth projects in mind.

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While the unified communications system will reduce costs over time, it will require a significant change management effort, Ross says. The content management system will result in significant cost savings and improve cycle time, because it will streamline core business processes, impacting about 80% of the company, he says. It will also improve the customer experience as transactions and information move online. "Our initial look says it could be quite transformative and beneficial to the entire company," Ross says.

Financially, these endeavors have been made possible by a 2% increase in the IT budget for 2013, and by a significant reduction in capital expenditures over the past few years, thanks to virtualization, a reduced data center footprint, decreases in hardware prices and heavy use of software-as-a-service (SaaS) applications. Ironically, Ross says, operational spending on SaaS offerings has risen so dramatically of late that in the coming year he will focus on reducing costs by streamlining Western & Southern's SaaS portfolio, which consists of more than 100 applications.

Some of these applications are only available in SaaS form, but Ross says there are opportunities to, for example, whittle down the 12 to 15 CRM applications in use. Even though these systems are tightly aligned to specialized financial services that the company offers, he says, "if we did a careful analysis of the features and functions, we'd see a heavy overlap. Maybe we can get away with just a couple or a centralized CRM system that is tailored for each business unit."

Time for Rationalization

Portfolio rationalization is an activity that many CIOs will undertake next year, says Alan Guibord, founder of The Advisory Council. "Economic cycles are getting shorter, and decision cycles are getting shorter," he says. "Most clients are saying, 'How do we simplify things and create an infrastructure that can be more reactive to the needs of users? What can we condense, consolidate and throw away? What do we outsource, and what do we keep in-house?' "

In many cases, he says, companies are moving to a more variable cost structure, in which they bring in specific expertise when they need it and get rid of it when they don't. "No one is opening up their pockets to spend more money -- they have the pocket of money and need to adjust spending to a more realistic model," says Guibord.

This means taking a holistic view -- understanding the business strategy, identifying the initiatives that are tied to that strategy and determining which pieces of the IT portfolio support those initiatives. Once you identify the core competencies needed to fulfill those initiatives, you can align your resources accordingly and find more variable ways to fulfill your other areas of needed expertise, he says.

In the end, whether you think 2013 will be the year of the cloud, the year of mobility, the year of analytics or the year of security, this much is clear: IT shops can't jump on any technology bandwagon that comes along without reviewing its ability to foster growth, and they have to continually look for ways to cut costs.

"We can't afford, even in tough times, not to invest in technology that supports the business -- that's who we are," Mahaffee says. "So we need to make smart choices that allow us to invest where the growth opportunities are and make sure the infrastructure is tuned to enable them."

Next: Test-driving top technologies

Brandel is a Computerworld contributing writer. You can contact her at marybrandel@verizon.net.

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Copyright © 2012 IDG Communications, Inc.

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