Shaping a compelling IT financial plan

When it comes to telling the story of IT financial planning, a CIO can no longer be penning a memoir, instead they must be plotting a multi-episode series fit for streaming services. The days of discreet budgets and singular tech roadmaps are as outmoded as terrestrial TV. An effective CIO is part of an ensemble cast helping to shape the organisation’s narrative over multiple seasons.

Gartner®, a company that delivers actionable, objective insight to executives and their teams notes in its global research¹ ‘CIOs Need an IT Financial Plan, Not Just an IT Budget’, that CIOs “must construct a strategically aligned, contextualised IT financial plan to demonstrate IT’s financial value beyond the annual budget cycle.”

This finding resonates with so many of the organisations we work closely with here in New Zealand. We asked five IT leaders from the utility, construction, banking, telecommunications, and construction sectors, to provide their insights into budgeting and IT financial planning.

‍

Eye on the long-term tech investment

As we hear more about dealing with technical debt, coupled with pressures brought about first by Covid, and now weather events and rising costs, we’re learning that an incremental approach just doesn’t cut it in today’s environment. Boards and senior executives are keen for transformational change that goes beyond annual budgets, and they expect CIOs to lead the way.

As Michael Cooper, Chief Technology and Improvement Officer at Firstgas Group puts it

‍

Budgeting on a 12-month basis is probably no longer appropriate, you need to start looking at your budget in a longer ‘lifecycle-orientated’ way.

- Michael Cooper, Chief Technology and Improvement Officer at First Gas

‍

To do that successfully, Gartner, Inc. research suggests, “the baseline should be given a context by looking back two years”. Also “This context provides a starting block for the link between IT costs and their business drivers”. 

“You need to be very clear about your costs and you have to understand the make-up of those. I think you’ve got to standardise this by looking for consistency, you don’t want variability in the way your costs are structured,” Michael says.

A similar view is expressed by Brian Northern, CIO at Fulton Hogan, who says “the reason tech costs can blow out is because people underestimate the complexity, underestimate the reach, integration and security components.”

The initial CAPEX might be well understood, but not the ongoing OPEX that derives from such things as SaaS expenses, licensing fees, and costs around ongoing support, which ideally need to be baked into the business case upfront.

ANZ Chief Information Officer, Michael Bullock says when it comes to IT financial planning at ANZ, there are “two sides of the ledger” that are considered. One side is managing and maintaining the lifecycle of the current estate, while the other is the bank’s appetite for tech investment.

“Then in the middle, we’ve got a run rated OPEX line which we use to perpetually invest in key technologies or key business services. This mechanism helps us keep current, so were not drifting as and when the investment appetite goes up and down.”

‍

Aligning IT with business strategy

Gartner, Inc. research found that “many CIOs remain under pressure to stabilise IT costs or even reduce them even as enterprisewide technology investments increase and require additional funding for foundational and new IT capabilities”. It therefore recommends CIOs “demonstrate the value of IT’s current spend and future, long-term investments against business outcomes by aligning IT’s planned initiatives and spend to achieve the enterprise strategy.”

For Brian, that goes beyond his company’s own internal IT investment, as increasingly Fulton Hogan is being evaluated on the technology innovation it can bring to a project. 

“We are no longer a construction company that physically builds a bridge or a road, while we are doing that, we are also digitalising as much as possible as well as creating a digital twin as part of the job,” he says.

Brian is now working to three-year financial horizons with three distinct areas in his planning. The first is initiatives that align with the business strategy, and this includes cost optimisation and going into new markets. The second is tactical activities, such as planning for a security event, or assisting with acquisitions that the team must deliver on. The third is what he calls ‘risks and opportunities’ – looking at new tech that can potentially help them innovate, such as augmented reality, virtual reality, AI, blockchain and quantum computing.

Meanwhile Gavin Costello, Chief Digital Officer at Network for Learning, the fourth largest network operator in New Zealand connecting schools and kura across the country, says his team are looking as far ahead as ten years. 

“You need to have a longer view, understand your tech architecture, your roadmap, and change points. And have an eye on your environment, what things are happening, how things might change.”

He notes high profile cyber security attacks on organisations have been influential in putting security front and centre for his board and executive team. As a result, the technology investment has increased, and the organisation has grown in size.

We believe this aligns with commentary from Gartner, Inc. that "there is a growing appetite for technology among boards and senior leadership teams, and they expect CIOs to be playing a strategic role in the investment decision making."

‍

Tell the story of tech

Steve James, General Manager of Technology at Countdown, concurs and says first up its necessary to be crystal clear on your costs. Data tools that analyse where IT costs are occurring in the business – in his case, often in the supply chain – are critical when showing the alignment between tech spend and business benefits.

Perhaps even more important, is being able to tell a good business story.  Steve is as consumed with working out ways to improve the shopping experience for visitors to Countdown’s 185 stores across New Zealand, as anyone else on the leadership team.

“We front foot the narrative, rather than waiting for the budget cycle,” Steve says.

“The responsibility is on your senior tech executives and their direct reports to talk in a way that is engaging and tells the right story. If you can nail that storytelling piece, you’re much more likely to be heard on the long-term impacts of something, rather than ‘this is expensive’.”

‍

Sharing the narrative

This is a position we are familiar with at Spark. We consume the solutions we share with our business partners, so we know first-hand that now, more than at any time in the past 20 years, is the time for transformational change. 

In the past we mostly worked with CIOs, and maybe a few CFOs, now we work right across the organisation. This means we understand how critical it is for CIOs to ensure everyone understands their goals, objectives and strategies. 

Working across the business on opportunities to transform can bring new budget from the business areas that benefit, expanding the traditional IT budget. Delivering on the ROI is critical in gaining confidence from the board and the business to continue to invest. It’s vital to go in eyes wide open around risk and compromise, by leveraging the experience of those that have done it before. 

In my view, it's about acting in a way that is the opposite of the Gartner, Inc. graph depicting the failure points in conversations between CIOs and CFOs - where the journey to unfulfillment is charted by IT being siloed, tech-centric, misleading, static, short-sighted, uninformed and, finally, unaccountable.

‍

‍

In other words, a well thought out IT financial plan is akin to that hit streaming series in which every episode of every season contributes to a greater story. Told in the right way, CIOs can demonstrate how IT will drive the business further and keep its customers tuning in for more.

ABOUT THE AUTHOR

Laurence Chapman is the General Manager of Spark Group Sales for Wellington and the South Island. Laurence has over 30 years’ experience working with Government and Enterprise helping them achieve their business objectives.

¹Gartner, CIO’s need an IT Financial Plan, Not Just an IT Budget , Galliopi Demetriou, Cesar Lozada , 23 August 2021, Refreshed 20 March 2023. 

GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.