Forecast 2013: Building a Better IT Budget

Eric Lindgren, CIO at PerkinElmer, will spend the next 12 months like many of his peers: hunting for cost savings that can be re-allocated to high-impact technology initiatives, such as mobility and analytics. As part of this effort, his IT group will continue to streamline the company's application portfolio, move last year's acquisitions onto its corporate-standard ERP platform and shift some fixed investments into more variable models via a private cloud.

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At Western & Southern, however, Ross is finding the current economic climate to be an easier one in which to make the business case for two multiyear projects that are more process-oriented than information-oriented: an enterprise content management system and a unified communications system, both of which will replace existing systems that have reached end-of-life status. "There's a little bit more openness to embark on these larger projects," Ross says. "I think they could have been justified even in the darkest days of 2008 and 2009, but we would have gone through more hoops."

While the unified communications system will reduce costs over time, it will require a significant change management effort, Ross says. The content management system will result in significant cost savings and improve cycle time, because it will streamline core business processes, impacting about 80% of the company, he says. It will also improve the customer experience as transactions and information move online. "Our initial look says it could be quite transformative and beneficial to the entire company," Ross says.

Financially, these endeavors have been made possible by a 2% increase in the IT budget for 2013, and by a significant reduction in capital expenditures over the past few years, thanks to virtualization, a reduced data center footprint, decreases in hardware prices and heavy use of software-as-a-service (SaaS) applications. Ironically, Ross says, operational spending on SaaS offerings has risen so dramatically of late that in the coming year he will focus on reducing costs by streamlining Western & Southern's SaaS portfolio, which consists of more than 100 applications.

Some of these applications are only available in SaaS form, but Ross says there are opportunities to, for example, whittle down the 12 to 15 CRM applications in use. Even though these systems are tightly aligned to specialized financial services that the company offers, he says, "if we did a careful analysis of the features and functions, we'd see a heavy overlap. Maybe we can get away with just a couple or a centralized CRM system that is tailored for each business unit."

Time for Rationalization

Portfolio rationalization is an activity that many CIOs will undertake next year, says Alan Guibord, founder of The Advisory Council. "Economic cycles are getting shorter, and decision cycles are getting shorter," he says. "Most clients are saying, 'How do we simplify things and create an infrastructure that can be more reactive to the needs of users? What can we condense, consolidate and throw away? What do we outsource, and what do we keep in-house?' "

In many cases, he says, companies are moving to a more variable cost structure, in which they bring in specific expertise when they need it and get rid of it when they don't. "No one is opening up their pockets to spend more money -- they have the pocket of money and need to adjust spending to a more realistic model," says Guibord.

This means taking a holistic view -- understanding the business strategy, identifying the initiatives that are tied to that strategy and determining which pieces of the IT portfolio support those initiatives. Once you identify the core competencies needed to fulfill those initiatives, you can align your resources accordingly and find more variable ways to fulfill your other areas of needed expertise, he says.

In the end, whether you think 2013 will be the year of the cloud, the year of mobility, the year of analytics or the year of security, this much is clear: IT shops can't jump on any technology bandwagon that comes along without reviewing its ability to foster growth, and they have to continually look for ways to cut costs.

"We can't afford, even in tough times, not to invest in technology that supports the business -- that's who we are," Mahaffee says. "So we need to make smart choices that allow us to invest where the growth opportunities are and make sure the infrastructure is tuned to enable them."

Next: Test-driving top technologies

Healthcare IT

Outliers Move Beyond EHR and the Stimulus

Healthcare companies have operated in their own tech-spending ecosystem since the government launched its stimulus program, which gives providers incentives to improve patient safety and quality of care.

While much of the spending has gone toward clinical information systems and electronic health record (EHR) technology, some healthcare providers are focusing on other areas of IT. Vanguard Health Systems, for example, has embraced the bring-your-own-device movement. And if Vanguard senior vice president and CIO Scott Blanchette, had his way, the company would also be moving toward cloud-based computing models.

Blanchette admits that his advocacy for the cloud and BYOD makes him an outlier in the world of healthcare IT. "There is a wave of efficiency helping other sectors not only compete but succeed," he says. "We've got to find ways to be efficient and deliver a better experience that's also compliant with regulations."

Blanchette has worked with internal auditors and privacy experts to set up a BYOD program that includes support for tablets, smartphones and -- this year -- laptops. "There are solutions that allow me to publish apps without them being on the device," he says. "They're wildly more secure than [the company] owning the device and tracking what's going on." The BYOD program, according to Blanchette, is not only saving money, but also improving employee satisfaction.

A move to the cloud is further down the road, Blanchette says, because the healthcare industry has big investments in fixed assets, the migration costs would be steep and there's a lack of healthcare-specific cloud systems. But it's an area he'll watch closely over the next six months. "To be successful, [a cloud provider] would need the scale, expertise and investment capacity to overcome the issues," he says. "If someone could figure that out, they would have a lot to offer prospective customers that would buy into this business model."

Embracing new computing models like the cloud and BYOD, he says, would allow healthcare CIOs to spend less dealing with mundane technologies like storage capacity and more time on systems that help save lives. "That's why we're here," he says. "If we're spending more than half the budget on infrastructure commodities, that's half the budget that's not making sick people better."

Tech spending will likely return to its normal levels when the stimulus program ends in 2013, Blanchette says, adding that spending could further retrench in response to healthcare reform.

This story, "Forecast 2013: Building a Better IT Budget" was originally published by Computerworld.

Copyright © 2012 IDG Communications, Inc.

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