Time for government IT to stop acting like a cost centre
Many government IT organisations are still perceived purely as cost centres. This puts them at the top of the list for budget cuts because IT generally lacks a strong political constituency.
Fighting a defensive battle when IT is perceived this way will get government IT leaders nowhere. Instead, they must go on the offensive to lead digital transformation by focusing on the value IT delivers and demonstrating good business acumen and financial stewardship.
The 2021 Gartner CIO Survey shows that 34% of government CIOs expect to reduce funding in 2021. How they respond to those mandates will impact not just the IT budget but also the agency’s effectiveness long term. Let’s be clear: few government services can exist without information or technology, so IT matters.
While benchmarking IT costs across government agencies is a promising and worthwhile approach to finding cost optimisation opportunities and quantifying the true cost of technology debt, the process is complicated by differences in mission, economies, tiers and organisational decision-making practices.
Government CIOs can start by examining the costs they can control directly and determine what costs they can influence. Then work with their business and mission counterparts to prioritise and plan if, where and how they need to collaborate on joint cost optimisation efforts.
IT cost optimisation begins with IT
Cost optimisation implies some ideal way exists to ensure organisations can optimise value for money by finding the perfect balance between money spent and value received.
Commercial executives can use professional judgement to weigh risks, probabilities and unknowns, as well as predict when an investment in automation will result in overall savings. Government officials, however, have tougher challenges such as having a mission value that isn’t easily quantifiable in financial terms, as well as ownership and costs that are often ambiguous and fragmented.
Never discuss cost with senior leaders without also discussing risk and value. Just as fuel efficiency in a car differs depending on terrain, speed, weight and safety features, so too does the overall value of IT investments depend on better understanding of strategic objectives. Business and mission leaders must understand their priorities.
Assess and address IT cost savings
Begin cost optimisation efforts inside IT for two reasons: control and credibility. If IT financials are in disarray, business and mission leaders will naturally distrust any proposed cost optimisation efforts that involve them or their budgets.
A uniquely public sector challenge to cost optimisation is how funding constraints, combined with large, hierarchical, federated organisation structures, add layers of complexity to figuring out what savings IT can realise or what costs IT can control.
Government budget dynamics may hinder efforts to recognise savings across federated organisations. For example, one savings effort may involve central IT or a shared services group investing in enterprise capabilities that help agencies spend less.
Achieve near-term savings by assessing and addressing IT cost-saving measures, which are prioritised by not only ROI, but also risk and cultural fit.
Establish ongoing practices and values
Collaborate with business and mission counterparts on overall cost and value optimisation by establishing ongoing IT cost optimisation practices and communicating progress effectively.
Government budgets run through fat “spend it while you can” eras, as well as times when cost-cutting fire drills seem all consuming and never ending. While economies and government budgets will continue to ebb and flow, focus on the overall cost-benefit-risk picture and respond to budget windfalls and shortfalls by optimising investments against that picture.
It takes some intentional effort to integrate conscientious frugality into IT decision-making and operations. Assess your organisation’s ability to optimise costs strategically. Factor in any constraints or challenges to your approach. Examine existing investment prioritisation processes and determine where and how they address impacts on operational costs and acquisition costs.
Determining what the ideal IT operational budget should be is more art than science. While the difference between cutting fat and cutting bone or muscle depends on the value delivered and is in the eye of the beholder, benchmarks can help clarify that discussion. This can help identify which areas of IT delivery are likely to contain untapped opportunities for cost cutting, which are running cost-effectively and which might be underfunded and running into technical debt.
Establish financial transparency roadmap
Since IT funding in government is often appropriated or budgeted independently from business and mission costs, a tendency exists to share the pain equally in times of austerity. This ‘salami slicing’ or ‘watering can approach’, where all parts of the agency get their budgets cut by the same percentage, can backfire.
Educate leadership on the total cost, value and risk implications of information and technology investments by establishing a roadmap to financial transparency that complements budget submission justification.
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