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5 Steps To Fund Digital Transformation By Redirecting Wasteful IT Spending

According to IDG’s most recent survey of IT decision makers, 93% of organizations have plans to pursue digital business transformation and 48% already have a digital-first approach. How are they working transformation into the budget? In part, by reallocating dollars from non-strategic IT or the day-to-day IT activities that are not business-specific, to strategic IT that drives the business forward.

Here are five steps to guide you when making the change:

STEP 1: Find the waste in your IT budget

Look at how much you’re spending on non-strategic versus strategic IT activities. Non-strategic IT spending keeps your IT running while strategic IT spending generates business value for your company.

Deloitte reports that traditionally, CIOs had spent 70 percent of their IT budgets (plus a lot of work hours) on non-strategic activities. Now that key technologies have become more efficient and less expensive, particularly cloud and storage services, Deloitte found that companies can reduce that percentage by 20 percent or more. This frees up resources for digital transformation.

To figure out how much of your organization’s current IT budget is wasted on non-strategic activities due to inefficiencies, compare what it costs to keep your systems running internally to what it costs to outsource the same responsibilities. Pay particular attention to the activities that outsourcers can do better and faster due to efficiencies. Then crunch the numbers. How much could you save? Then ask what you could accomplish if you reinvested the savings into digital transformation.

STEP 2: Determine how to redeploy your current IT staff

Don’t fire your IT staff just to save money. Rather, retool and retrain your top talent.

Your in-house IT personnel know your business and care about its success. With their institutional knowledge, they are in the best position to help lead your digital transformation and drive other strategic IT initiatives. While at first your existing IT team may be concerned that their jobs could be outsourced as you reallocate IT resources, they’ll probably be enthusiastic once they know they’ll be redeployed and gain new and marketable skills.

Reallocating IT resources should be just that — using what you already have in better, more productive ways.

STEP 3: Initially, reinvest the savings into overcoming your transformation hurdles

The two top barriers to digital transformation are security concerns and lack of resources. And lack of in-house expertise ranks third, according to the most recent Digital Transformation Index from Dell Technologies.

By reinvesting what you save by offloading non-strategic IT and retraining internal staff to do more strategic work, you will likely simultaneously reduce your security concerns and improve your in-house expertise as part of the process. This means you may be able to tackle all three of the most common barriers to digital transformation — resources, security, and talent — in one strategic move.

The Index also reports that the majority of businesses are behind the curve when it comes to digital transformation. It found that 72% are either digital laggards, followers, or evaluators rather than adopters or leaders. If your company is part of the majority, the sooner you start reallocating budget dollars, the faster you can catch up.

STEP 4: Revise the way you think about IT budgeting moving forward

A save-to-transform mindset builds businesses. Whenever your company can take advantage of efficiencies provided by automation, machine learning, and AI-driven technologies, take advantage of it. They help eliminate the need for humans to do repetitive IT tasks while laying the foundation for continued transformation and growth.

Of course, deploying and managing transformative technologies in-house will not likely save you money. Instead, choose to work with a managed service provider (MSP) that has already invested in them and is committed to continually building its scale and operational efficiencies. Since you can expect IT efficiencies to continue to improve indefinitely, your company will benefit from your MSP’s continued advancements.

The way to think about IT budgeting in 2020 and beyond is to constantly look for waste in non-strategic IT spending so you can invest in transformational strategies instead. This is an ongoing mindset, not a one-time exercise.

STEP 5: Update your IT roadmap to include digital transformation

Plan ahead by planning for digital transformation. Every organization needs an IT roadmap to follow — it’s standard practice. Typically, they include what it will take to keep IT up to date and running (lifecycle management) and secure at all levels (risk management) and how you will manage your IT environment.

But now it’s equally important to include an IT business transformation category in your IT roadmap. IT business transformation covers digital transformation and business initiatives that involve IT.

The most proactive IT roadmaps also take digital disruptors into consideration. Digital disruptors shouldn’t be seen as negative. While they disrupt the status quo, they also drive the digital transformations that can help drive your business forward. If you don’t have in-house staff that regularly research and test new technologies as part of their job descriptions, work with partners who do. They will know what’s coming down the road, help you build a more effective IT roadmap, and help you reduce waste and find efficiencies in your budget.

Incorporating IT business transformation into your IT roadmap makes it easier for your entire company to adopt the save-to-transform mindset as well.

How much should you spend on digital transformation?

Digital transformation means something different to every company. It’s a broad concept — it encompasses using technological advances to do business in new and more efficient, effective ways. How much you should spend on digital transformation depends on a lot of things, including the size of your organization and its unique set of barriers and priorities.

As a rule of thumb, it’s best not to allocate more than 40 percent of your total IT budget to IT business transformation activities. You want to ensure your IT environment continues to run smoothly and securely as you make important changes.

First, focus on getting rid of your current, non-strategic IT spending waste and redirecting it to digital transformation. Then, you’ll be on your way to having an IT budget that truly drives your business forward — and gives your organization the most bang from your IT buck.

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