CIO Budget Planning: How EA Insights Improve Speed and Reliability

Every budget season, departments have new initiatives, investments, and projects that they need to get off the ground. Much of their effort goes into trying to demonstrate the value of their proposals and presenting a compelling case to their Chief Financial Officer (CFO). This means being able to present the potential Return on Investment (ROI) and value their proposed budgets will bring to the business.

With ever-increasing IT expenses and the economic uncertainty of the last few years, the pressure is greater than ever on the CIO. An ideal CIO budget straddles the fine balance between short and long-term goals for the enterprise, the need to improve efficiency and optimize costs, as well as ensure that innovation and growth are not neglected. It’s a challenging exercise in resource allocation, fostering innovation, driving growth, and ensuring long-term sustainability.

What’s on the Mind of CFOs?

The exercise of keeping a balanced strategy is, without question, complicated. It is helpful to bear in mind that the average tenure of any CxO is about 4-5 years. CFOs, just like their other executive colleagues, are under immense pressure to show short-term value and not only argue for long-term gains. With this grey area, every CxO needs to have both strategies working parallel to each other for a successful fiscal year. 

A starting point for many internal financial teams is assessing historical financial data and trends to establish a baseline for revenue, expenses, and profitability to set realistic targets and identify areas that require more attention. In this assessment process, CFOs also consider the overall economic climate, market conditions, and industry-specific factors that may impact the organization's financial performance. CFOs also focus on cost control and optimization in the organization. They scrutinize expenses across all departments, evaluating capital investments, labor costs, and overhead expenses.

IT is a key area of significant expense for many organizations today and one where clarity on value and ROI is often lacking. Many enterprises lack control and insight into their technology, resulting in costly application sprawl and poor transparency as to how technology supports the business’ value streams.

The Challenges of Quantifying Value and Measuring ROI

Enterprises will be much more successful if they focus on making changes that encourage value creation rather than having tunnel vision on the bottom line. Yet despite it being counterproductive and outdated for organizations to keep seeing IT as a cost center for the rest of the business, it is still often challenging to shift the conversation from cost-cutting to value and growth creation.

“Management experts say many CIOs still struggle to identify, articulate and quantify returns, especially for iterative projects without clear end dates and for projects expected to deliver soft returns rather than pure profit growth.”

CIO.com, IT ROI: 10 tips for selling (and proving) the value of IT

The CIO plays a vital role in crafting a case for the value of IT, but to do so, they need to speak get the right tools and insights. A CFO would be willing to invest in a software initiative, for example, if the CIO can show its value over time clearly.

CIOs are not alone in their pursuit of quality strategic planning tools, and the difficulties that come with that planning. Each department has its own challenges when showing value to a CFO. It tends to be much easier to “prove” value to a CFO on the commercial side, for example. A Marketing department will have clear KPIs on leads and pipeline aided by various industry and internal benchmarks. Revenue management can show the percentage of revenue attributed to Marketing and Sales efforts. This makes it easier for a CFO to see the ROI on investments in commercial organization. Other departments may look to other metrics such as customer engagement and satisfaction as measures of their value.

The budgeting process ultimately boils down to the CFO making prioritization decisions. Proposals with stronger ROI cases and clear connections to the company’s strategic goals are highly likely to be prioritized over proposals with unclear timelines and returns. 

So, how can CIOs get the information they need to develop impactful budgets that will reduce costs and reallocate resources without impairing the organization’s ability to execute and create value?

The Key to an Effective CIO Budget

Up-to-Date 360 Visibility on the IT Landscape

They need to begin the planning process with thorough, reliable information. The challenge is often in getting all of that information up-to-date and in one place. There is a very real struggle with outdated spreadsheets and disconnected data when it comes to CIO budget planning that makes this incredibly time-consuming. However, data-driven new Enterprise Architecture platforms like Ardoq excel in providing the CIO, in particular, the overview they so desperately need over their organization’s complex IT landscape. By leveraging integrations with existing systems and platforms, an EA platform can quickly pull together data to generate insights into the real business value of IT in a given company.

Identify Optimization Opportunities and Eliminate Redundancies

With this reliable foundation of information, CIOs then have the insights to zero in on “quick-wins” in terms of cost optimization as well as where technology needs to enable the big lifts the business really needs. Application Rationalization using data-driven Enterprise Architecture insights can help CIOs take back control over burgeoning IT costs and identify areas to simplify and streamline. This frees up budget and resources to invest in other value creating investments or initiatives.

Measuring Potential ROI on IT Initiatives

Measuring the ROI of an initiative can be more of an art than a science. However, Enterprise Architecture roadmapping capabilities like Ardoq’s Scenarios can help CIOs simulate and compare at speed the potential impact and benefit of potential initiatives or investments. It can provide dynamic, context-driven visualizations that will more easily communicate to key stakeholders like the CFO the kind of business value or impact investing in a platform will result in, not just in terms of dollars and cents, but in the business’s capabilities and ability to execute as well as over time.

Craft Better, Data-informed IT Budgets

At the heart of being able to make a solid CIO budget is being able to have the right data and insights in front of them to make reliable, informed proposals about where spending should happen. Strategic cost management rather than just cost-cutting, understanding which projects support organizational strategy and which IT initiatives create the most value for the business; all of this is not only possible when leveraging Enterprise Architecture insights but also considerably less painless than the alternative of being overwhelmed with data in disparate places without any clear information.

Technology and agility are pivotal to companies staying ahead of the competition, and how effectively a CIO budget is planned for and created is critical to the organization’s overall success.

To get an estimate of the savings an EA platform like Ardoq could bring to an organization, try our ROI Calculator.