Stuck "Keeping the Lights On"? Here's What To Do Instead

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The list of challenges companies face changes every day.  Most of these are cool and innovative ideas that are critical to address in order to move your business forward, but because some of these areas are so new to most companies they're unsure of where or how to begin.  Sound familiar?

Of course it does.  The bright side is that you're not alone.  Most people would agree with you.  In fact, in a recent study, IT leaders were asked to list their expectations for 2016, and which trends will have the biggest impact on their business.  This is what they said:

Any of these look familiar?  They should and that's great news.  Your everyday challenges are actually being recognized by businesses as focus points for  2016.

The same study also had leaders rank which initiatives they will need to support in 2016.  First on the list is implementing new IT solutions, followed by improving business processes, and finally, "keeping the lights on."  Sounds good, right?

Unfortunately, it's not.  While businesses have prioritized what the focuses are they also are forecasting an increase in spend across the board (see below).  If businesses want to take on new initiatives, but they expect to spend more across the board, where are they going to find money to tackle these initiatives for the business?  Budgets definitely aren't increasing.

And that's the hard truth.  The biggest hurdle stopping you from doing what the business is asking you to do is money.  Not really a big shocker there, we hear the "we don't have budget" phrase all the time.  But seriously, you won't be able to implement the new solutions the business needs, or improve the business processes you said you were challenged with.  Seems like you're set up for failure from the beginning.

So what are you left to focus on?  "Keeping the lights on."  Basically supporting ongoing operations and maintenance.

But what if there was a way you could show your company that there is money available for them to tackle these initiatives that are important to improving corporate performance? 

You have to look at this problem in a different light.  Gartner states 80-85% of budgets are spent "keeping the lights on."  Forrester Research similarly said it was about 72% of budgets.  That's a big chunk of change!  Businesses are focusing their priorities in the wrong order.  It should be to first to find ways to "keep the lights on" better, which will improve business processes so they can implementing new solutions.

Every CIO and IT professional should be challenged to reduce their “keeping the lights on” spend.

McKinsey Global Survey found that the top businesses are actually doing this and reallocating 6-30% of their budget for innovation.  Now we're getting somewhere.

The big question is, "Matt, how can I find money to reallocate?"

I think we can agree that basic blocking-and-tackling to "keep the lights on" is a very reactive approach.  This means that anything that happens is unplanned, and therefore, any expenditures are also unplanned.  So the reason IT struggles to innovate is because they are allocating over 72% of their budget to unplanned spend.

If we look at where businesses, on average, are spending their budget from a recent survey done by ESG Global we can see how much of that is planned vs. unplanned spend (sticking with 72% of total spend to be conservative).

What makes this even worse is that McKinsey Global Survey found that lower tier companies from their survey were sleepwalking through their reallocation decisions.  So even if you were to find ways to correct inefficient use of company money, they are not being recognized, or being put towards the greater goal.

It's not your fault.

Listen, I get it, the business is telling you to "keep the lights on" so you're forced to take a reactive approach to IT.  This means purchasing point products instead of evaluating long-term solutions since it's reactive.

But, the real cost of unplanned spend comes from all the necessary, but typically overlooked process costs associated with buying something you hadn't planned for.  All told any single unplanned purchase can involve 5-10 people across the organization and huge amounts of unseen costs when you add up all the time, effort, paperwork, and people necessary to buy it.  More often than not, the act of buying an unplanned item is vastly more expensive than the item itself.

Additionally, because it's unplanned you're more likely to try and "save" the company money when you do have to spend.  This typically involves asking for quotes from multiple vendors, but this only complicates things further.  Not every vendor will have familiarity with your infrastructure and to get them up to speed will take time having the same conversation over and over again.  If you're not spending time with them to do that then the recommendations they make will create inconsistency and inefficiencies.  These are the inefficiencies that end up creating problems, which create more unplanned purchases and end up costing you more.  It's a pretty vicious cycle.

This is exactly why the Big Dig in Boston was such a disaster.  The City started off with a budget and timeline for the project, but in order to "save" money the City used multiple vendors for different parts of the project.  These vendors had no working knowledge of what work was completed before them or what standards were used.  What this created were inconsistencies from one part of the project to another that had to be resolved before the next piece moving forward, increased the time it would take to complete the project, and overall ended up being billions over budget.  Just take a look at this list of issues: Big Dig Problems.

So what does unplanned spend mean for most companies?  

With the way things are, the actions you're being forced to take in order to "save" money are actually costing the business more.

It's not easy to get your hands around unplanned spend, but it is possible, and companies that do have a leg up on the competition, like the McKinsey study showed us.

Think about the impact this would have on your company.  This problem represents a huge opportunity if you can get your hands around it.  It's money that could be used on more important things, like implementing new IT solutions.

And that's a problem that Presidio, with its specific capability set, is uniquely positioned to solve you for.  We're helping IT professionals identify inefficiencies to reduce unplanned spend, so they can get back to focusing on improving corporate performance with new business solutions.

Contact Matt Rutter, Account Manager, Presidio at [email protected] for more information.

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