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3 Reasons ITFM/TBM Budget Cuts Sabotage Future Gains

Feb 06, 2020 | By Wil Cleaveland

Cost Optimization IT Leadership

When faced with mandatory budget reductions, IT leaders start scouring CapEx spend in search of “nice to have” items that can be cut, and ITFM/TBM programs are often seen as an ideal candidate. This is especially true for less mature programs — when organizations are still investing to achieve core ITFM/TBM capabilities but haven’t yet started realizing value. 

However, the long-term cost of pausing an existing ITFM/TBM program frequently outweighs any short-term benefit.

So, when there’s pressure to reduce spend, here are three reasons why your ITFM/TBM program should be the last thing you cut, not the first.

Increasing Long-term Innovation Capacity

IT is increasingly expected to deliver fresh, innovative solutions that drive growth and transformation for the business — new technologies, capabilities, etc. As a result, most CIOs and IT leaders rank ITFM/TBM lower than other CapEx initiatives, because they see it as an internally focused effort with less potential impact across the business.

Granted, in a one-to-one comparison, an ITFM/TBM program may not seem as innovative as other projects competing for funds. But as the program matures, it will enable more future innovation than would’ve been possible otherwise, by helping IT shift wasted run spend toward growth and transformation.

In fact, Gartner reports that the number one reason organizations pursue cost optimization through ITFM/TBM is to unlock funds for digital transformation — typically reducing total spend by up to 25% within two years.

The key point here is that cutting your ITFM/TBM program to fund other projects today could reduce the potential number of projects you’re able to pursue down the road.

Preventing, and Defending Against, Future Cuts

Pressure to cut IT spend is usually a symptom of a much deeper problem: lack of trust between IT and the business. If business leaders don’t have a clear line-of-sight into technology costs and what those costs enable, they’re prone to assume the worst — that IT isn’t being a good steward of its funds.

In this type of low-trust environment, mandatory budget cuts are used as a litmus test for IT’s fiduciary responsibility. When business leaders demand an X% top-line reduction of spend, they’re expecting IT to do two things:

  1. Self-select areas of the budget that can be cut without impacting service quality.
  2. Defend areas of the budget that can’t be cut without impacting service quality.

But without total visibility of costs, both of those tasks are exceedingly difficult, especially when IT leaders are forced to make reactive decisions in a short timeframe (as is usually the case when the business demands budget cuts).

That’s why the transparency provided by an ITFM/TBM program is so critical. Not only does it arm IT leaders to respond to budget cut demands quickly and intelligently, but it also builds greater trust in IT over time — reducing business leaders’ inclination to force justification and “self-cleaning” of the IT budget through arbitrary cuts.

Managing Variance & Reducing Risk

Before delaying or abandoning an ITFM/TBM program, it’s crucial to consider the potential impact on accuracy and predictability. One of the core benefits of a mature ITFM/TBM program is an enhanced ability to reduce, manage, and explain variance, which considerably reduces risk.

That said, the decision to pull funds from an ITFM/TBM program can lead to frustrating, but preventable, problems like:

ITFM/TBM Lets Organizations Pivot from Reactive Cost-Cutting to Strategic Cost Optimization

Cost-cutting is the antithesis of cost optimization — the former being a reactive measure for short-term gains and the latter being an intentional effort with long-term impact — and rarely can organizations effectively pursue both approaches in tandem.

Recent research from Gartner explains further, saying:

Arbitrary cost-cutting often delays optimization, because investments that would normally yield better results in the long term are delayed. These are the challenges of IT and business leadership, and what they must face in the current period of economic uncertainty.”

Ultimately, cutting ITFM/TBM to support other initiatives today puts opportunities to innovate tomorrow at risk — while perpetuating a culture of blind cost-cutting over strategic cost optimization, and slowly degrading IT’s credibility as well.

To learn more about how ITFM/TBM can shift your organization’s collective mindset from reactive cost-cutting to strategic cost optimization, get in touch today to start the conversation.

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