Informatica Perspectives

A CIO was once heard to say “I have a billion dollar budget and no money to spend!”  The point he was making is that, regardless of how big your budget is, the operating budget of the IT function is largely non-discretionary.  Most of the money goes to just keeping the lights on, and if there is any “spare” budget left, it is usually quickly absorbed by mandated initiatives such replacing old technology which is no longer supported, board-level directives such as disaster recovery, or government imposed changes such as Sarbanes-Oxley or other regulatory demands.

So how then do you approach the CIO to suggest that (s)he mandate that custom hand-coded point-to-point integrations be replaced by a tool-based centralized integration hub?  There is no question that at the macro-organizational level the centralized solution is more efficient – but it requires the investment of time and capital and an increase in the operating budget.  And we all know how hard that is to justify – especially in hard economic times like the ones we are facing right now.  And when you have a limited budget and compare a cost-saving initiative like an ICC against mandated “must do” initiatives – there isn’t much of a contest about which ones will win.

There is another option – it just requires a bit of creativity.  There is another IT budget in the enterprise; the investment portfolio.  The amount of money that most enterprises spend on creating new capabilities (versus keeping the lights on) varies by industry and by company size, but according to some industry analysts, the investment portfolio is an average of 30% of the total annual IT expenditure with some industry segments being as high as 40%.  So if a company has an IT operating budget of $1B, they are spending in the range of $300M to $400M per year on new capabilities. 

That is a lot of money, but there are some challenges associated with tapping into it.  Probably the biggest challenge is that the budget is fragmented across multiple functional silos.  So while $400M is a big number, once it gets divided up among all the business units and functional groups, it may break down to 100 budgets of $4M each (this is an overly simplistic scenario, but you get the point).  And each of the 100 managers making the decision of how to spend their $4M probably have at least $10M worth of initiatives that they’d like to invest in.  So if you were to approach one of the managers and ask them to set aside say $1M of their budget (25% of their annual investment portfolio) in an integration system rather than in a business system that directly impacts their function, they would laugh you out the door (or something more dramatic).

Here’s where the creativity part comes in.  You and I both know that each of those 100 managers needs integration.  So why not look at the portfolio of internal projects in an enterprise as a “market”.  Why not apply some of the concepts that have proven so successful in the free market economy to the internal operations of an organization.  Since everyone needs integration, if you could simply get a good understanding of the demand in the internal market, you could build a business around it.  Viola – you have the makings of a self-funded ICC!

This is not rocket-science.  It simply means looking at the internal operations of an organization from a different angle.  Granted, you still need to come up with the $1M in capital to purchase the initial software licenses and hardware infrastructure to launch the shared integration system, but getting approval for a capital investment is very different than asking for an increase in operating budget.  If you do your homework and show that the internal demand for integration from new projects is real and that it will be paid for by a series of incremental project chargebacks, it’s not that difficult to convince the finance and business executives that control the purse-strings to approve the capital investment.  In fact, the best time to propose such a capital investment may be at the end of a fiscal year.  From personal experience working in multiple large corporations, more often that not companies have capital budgets that are under-spent near the end of the year.

To go one step further, if the ICC is doing a really good job leveraging re-use and the efficiency of a tool-based approach, they should be able to charge the projects for the integration work, add a surcharge to cover operational costs and continuous improvement activities, and still do the work for less than the custom hand-coded solution.  If done right, an ICC can truly operate like an internal shared services business and not add a burden to the operating budget.