IT Budgets Reflect the Overall Business

 
 
By Michael Vizard  |  Posted 2008-07-30
 
 
 

Given the state of today’s economy, there is naturally a lot of chatter about saving money when it comes to IT spending. Most efforts to reduce the size of IT budgets are focused mainly on hardware spending. As a result, server and storage virtualization are at the top of the IT agenda because these technologies help companies get more for their hardware dollar.

But when it comes to saving real money on technology, most enterprises shrink from the opportunity to substantially change the IT financial equation. The truth of the matter is that most IT organizations have any number of applications that are either redundant or have had their primary purpose incorporated as a feature set in another application.

Unfortunately, very few organizations do anything resembling a real application audit of their enterprise. Many are unsure which applications are tied to a strategic business process versus which have become redundant.

For example, R. L. Polk & Co., an organization that provides research data to the automotive industry, has embarked on a top-to-bottom analysis of its IT operations. According to Gary Rosteck, manager for data quality, the company initiated this effort by first reviewing its business rules and data models using tools from DataFlux, a unit of SAS that specializes in master data management (MDM) technology.

The goal of this activity, says Rosteck, is not just to improve the quality of the company’s data, but also to identify redundant applications in the long term so R. L. Polk can consolidate systems more efficiently. Once that’s accomplished, the company can think about reducing the number of people it needs to manage its entire IT architecture.

None of this re-engineering can happen overnight, so companies need to take a modular approach to the process. But the conundrum most organizations face is that they are so focused on IT savings in the short term that they never get to realize the large savings that can be derived from taking a strategic approach to the way information technology supports business processes.

In addition, IT must be able to make a strong case for spending additional money on the tools needed to identify which applications and business processes are linked. On paper, it sounds good to say we need to spend a little to save a lot, but when your organization is facing an imminent budget cut, it can be hard to make that case successfully.

That’s why IT leaders need to take a longer-term approach to MDM projects, which can pay off 10 times more than any server- or storage-consolidation project ever will. But trying to take a comprehensive approach to such projects is probably never going to work.

Instead, companies need to adopt a more modular strategy that allows them to streamline the IT environment, one business process at a time.

Of course, any IT organization that decides to undertake a master data management project has two basic choices: It can either use the data management tools at hand or spend money on MDM platforms from vendors such as DataFlux, IBM and Siperian.

Given the general lack of MDM expertise, the tools from the vendor community are probably the better way to go if your company can afford the upfront investment. If it can’t, it may take your internal customers a lot longer to get the results they seek. However, if an IT organization is serious about reducing the real cost of computing, MDM must be an essential part of the process.

Nobody likes to admit that they’ve allowed inefficient business processes to take hold, but we all know that any company that is more than two years old probably has some redundant business processes. So the next time the CFO tells you to pare back the IT budget, you may want to open your business executives’ eyes to the true state of enterprise computing today.

The simple fact of the matter is that IT expenses are a direct reflection of the business. This means that if companies really want to cut back on perceived fat in the IT budget, they need to first get the overall business back in shape.