Aligning IT spend to business outcomes

Aligning IT spend to business outcomes

Tech is expensive. On a personal level, keeping the family phone, tablet, laptop estate up to date is wallet-draining. At an organisational level, tech spend can easily make the difference between success and failure. Typically, (Gartner and others will tell you) an organisation might spend somewhere between 0.5% and 25% of its operational budget on technology. When you dig deeper than these metrics and factor in effort maintaining and using technology across all users, it’s often higher than that. The challenge is knowing what outcomes that spend is really supporting. For the family devices, the outcome might be improved productivity, more TikTok viewing or fewer complaints and it’s easy to align one to the other, but this is much harder to achieve in a corporate environment.

Aligning IT spend to specific outcomes makes it much easier to make decisions on technology, to prove value and to drive both internal and 3rd party technology teams. This all needs to start with a view on what the overall organisation objectives are. Is there a clear view on the organisational goals and on how each component of the business contributes to those? Is there even a clear view on what components the business is made from?

IT spend then needs to be broken down into components which can then be aligned to these outcomes (which is harder than it sounds). There are many different IT cost models available but they all look at different ways of breaking down IT spend into categories around hardware, software and effort as a minimum. Agreeing these categories and the level of granularity that will be needed is where the difficulty starts and where many organisations reach a dead end. In order to avoid this it’s worth considering the following simple steps.

• Start with the basic categories above and at a high level, don’t try to build a very detailed cost model to start with
• Expect there to be gaps where the specific cost data is not available and be prepared to make some assumptions to start with. Document these assumptions.
• Focus on smaller IT services, ideally only used by one business unit to start with, to help build the process

Once there is some (likely partially complete) view on IT components and associated costs these can be aligned to the business users that use them. Some will be organisation wide (such as Microsoft 365) and some may have very small user-bases. Where there are multiple user-bases it is important to allocate a proportion of that application to each user-base based on how critical it is to helping those users support the agreed organisational goals.

Creating these links helps provide a clearer view on how spend on IT is linked to the organisational objectives and supports more informed decision making.