Software systems to innovate and grow

A guide to avoiding wasted budgets by following a method

By Carlos Taborda July 2, 2018 10 mins read

Let’s face it, IT is complicated enough as it is. While there are many sensible IT management practices, we sometimes lose sight of what’s most essential.

Projects can become overwhelming to the point of losing track of where things are. In order to gain control of your timeline and budget of new projects, you find yourself frantically creating bandage policies to put out fires, which will end up becoming a messy waterfall, or worse yet, a false-agile, gate based system. And eventually, it will eat away at your IT budget.

So, what can you do?

The Pains

More often than not, IT budgeting relies on an educated guess. At the beginning of the year when an IT organization or department is reviewing where to allocate funds, a year’s worth of projects must fit into a predetermined budget before the year has started. Why is this a problem for budgeting? With a predetermined budget, an IT organization is not always prepared for potential problems, such as an overlooked backlog derived from the previous years’ work. Poor planning forces an unexpected increase of workload to be addressed, stretching the budget thin.

To help visualize, imagine a bucket of water. The water in the bucket represents the years budget. As the year continues, all we’re doing is allocating the water and hoping it doesn’t run out before the year ends. From a budgeting perspective, the last thing you want to do is have to ask for more water.

How Methods Help Avoid Waste: Budget Water Bucket

Let me clarify: the goal of this article is not to fight the process by which your organization assigns budgets, however flawed it may be, that’s a fight for another occasion. My goal is to offer advice on how to utilize limited resources and help you to recognize and avoid common budget eating problems. This article will explore different lightweight techniques to keep your budget buckets intact and ensure there are no leaks.

Let’s start by looking at where the budget is going.

The Budget

All budgets are not equal. That’s obvious. What is equal, and not for good reasons, is a common trend happening. When we take a closer look, you will begin to notice the flaws in where those IT budgets are going.

According to Deloitte Insights, a company specializing in research designed to help organizations reach their potential, 83% of a company’s IT budget is being put into business operations and incremental business changes, while only 16% of the total IT budget is going towards business innovation.

International Data Corporation (IDC), a global market intelligence firm, shows 77% of Government IT budgets go into legacy systems. And instead of seeing this number shrink, as we would hope progress would look like in this new era, their data shows just the opposite, a growing trend. Here are a few more examples of organizations showing the percentage of IT budgets, which are being allocated towards legacy systems:

  • Army Corps of Engineers – 96% of its $459.8 million budget
  • Nuclear Regulatory Commission – 93% of its $156.5 million budget
  • Agriculture Department – 90% of its $3.2 billion budget
  • Veterans Administration – 88% of its $4.4 billion budget

What the data shows is an average of 10-15% of our budget is going into innovation. That 10-15% is what is left of the budget for IT teams to make things better. Now hopefully you’re starting to see why we have to be diligent about our planning.

Innovation Budget

I’d like to take a moment to emphasize the importance of this term, innovation budget. While we’re talking about budgets, let’s define what the innovation budget covers and why it’s so important. Bear with me for a second.

I’m defining innovation as new features, new products, new systems. This can vary from expanding an existing system to deliver new capabilities, all the way to creating new systems to help us automate an old manual process, or even to replace a legacy system.

All these are innovation.

In other words, the results you get with that 10-15% of your IT budget will be how the business measures your success. Sadly, it’s all about optics. Let me repeat this. Your success as a leader is measured by the impact of successful new things. Most businesses won’t count your failed attempts as successes. They will only look at NEW wins, and quantify those results to your accomplishments.

Those number trends we looked at earlier, show your company most likely won’t be paying attention to renovating an old system, as long as they haven’t stopped working. And yet, they will continue to measure your capacity to deliver the new toys. As an IT leader, you’re dependent on an old system to produce new products, with a budget that only allows for a small percentage of its funds to innovate. And it all comes out of the innovation budget.

Now What?

Now, that you understand the conflicting budget pains an IT leader must go through, what can you do to help manage the budget you’re given, stay on track, and still be able to deliver measurable results? We have a few suggestions…

1. Keep your sight on project ROIs

Even the best IT leaders can lose motivation to keep track of a project’s return on investment. It’s hard to stay on target when you have fifty targets to hit in a given quarter, while simultaneously managing multiple teams and evolving timelines. All while keeping the lights on.

Furthermore, there’s the question of product quality. This is where you ask things like, “Are we building the right thing?” or “Are we building the product correctly?” This could drive any sensible human being insane. As IT leaders, we’re used to it, right?

As basic as our suggestion may sound, in order to break through all the clutter and day to day fuss, there needs to be a clear vision of your goals established for each project. I am not talking about a schedule or even an execution plan. Plain and simple, you need clear ROI indicators of the business impact for each initiative.

When defining yearly projects, before setting deadlines for your initiatives, try setting a ballpark return. If you’re funding a project that costs around $100k, try at the very least to consider which KPI’s the $100k will effect.

Ask yourself, and try to predict what key performance indicators will go up or down? This variable should always be visible as the goal of a project, helping to ensure the relevance of the project is kept up.

Keeping your priorities on the most impactful initiatives will allow you to make the most out of the budget and maximize the impact to the organization.

2. Keep small cadences going

What happens when a ship goes off track by 5%? How about when it goes unnoticed for months? You miss your destination by thousands of miles.

Check the course of the ship often, and you will quickly see how this helps your team avoid detrimental gaps. This is why we have implemented 1-week sprints, a maximum of 2 weekly sprints when absolutely necessary, into our policy, and strongly recommend adopting this practice.

The value of a weekly report on progress keeps a project team centered on the tasks at hand, and keeps your team accountable for steering to the ship. Everyone on board can either correct course, or keep sailing in the correct direction.

How Methods Help Avoid Waste: Steer the Ship

By leveraging basic mechanisms, such as a simple weekly report on progress (we recommend weekly sprints) or some other form of communicating your stories that are being delivered, you are keeping your ear to the ground. Even if you are not directly involved with the day to day of the project, you can rest assured knowing there is a system in place to catch potential shifts before they get too far off course.

The benefits of implementing this small shift in your process are countless. Letting the teamwork without iterative reviews can lead to a tremendous negative impact on the budget. You might end up having to re-do months of work to steer things in the right direction, and solve the overlooked technical or architectural decisions. Implement sprints, and like magic, you can avoid huge headaches.

3. Use lightweight prototyping to validate and socialize solutions

One of the most wasteful things we do as executives is build full-blown MVPs with unconfirmed requirements. Meaning, we go down the path of designing, engineering, architecture, and testing of a body of work only to realize that the project has not been socialized to the business stakeholders.

I have advised our clients, more times than not, to avoid moving onto engineering, and instead to deploy a smaller budget towards validating an understanding of requirements through the use of visual prototypes.

We like to use hand-drawn screens, and clickable visual prototypes to effectively communicate to stakeholders an understanding and acceptance of a product. When they have something in front of them that *feels* the way they expect it to, they are more likely to approve and move forward. The key is there’s zero code written; it’s all visual.

The biggest benefit of planning and communicating well is that by leveraging prototyping early in the process, you make the initial feedback loop smaller. We want feedback on a potential product before a single line of code is written. This early and continuous feedback throughout the project helps to avoid building the wrong thing, allowing room for you to rework the product while staying under budget because the hard work hasn’t happened yet.

4. Avoid context changes

This story of abandoning projects is one that I’ve heard over and over again in IT. There is this great idea on the horizon, but no one understands the project’s goal. Instead, they have decided to individually put out fires, only to find out that hours of work have been wasted in various directions.

At this point, a project gets de-prioritized, and the work, time, and money put into the project are lost. It’s work that’s kidnapped and you have no way to get that time back. If you ever want to rescue the work and be able to resume from where you were, you won’t be able to do so without paying a ransom. Engineers will need time to re-align themselves with the project. Sometimes the stack’s components might be so outdated the team will need to spend time catching up; or even worse, a whole new team might be assigned the project and all that work is a complete loss.

How Methods Help Avoid Waste: Resources Lost

When I think of how to avoid this, I think of what one of my clients said to me, “The business is the dog, and IT is the tail.” What this means is the business will continue to do its thing, and you will have to go along with it. There’s no way around that. But even though you cannot change the way a business functions, you still have options on how to manage context changes.

There’s a difference between simply following the dog, and actively tracking the important things your team has invested in. Doing the groundwork will give your team confidence because you have determined the importance ahead of time, and are tracking your KPIs. When all this work is in the forefront and background, there is no more abandoning a project because your team will have determined where the project is going, and will have evaluated its importance long before its execution.

Here we’ve discussed some underutilized strategies which will help get the most out of your IT budget. Instead of implementing complicated and strict policies, consider enforcing these basics, and your company will increase productivity and communication without breaking your budget.

  1. Keeping your ROI numbers at hand in order to make good priority decisions.
  2. Institute a cadence based rhythm in order to keep your finger on the pulse of the project.
  3. Use simple and effective ways to communicate and validate the project with stakeholders.
  4. Try to avoid too much context change to help keep your priorities align with your ROI.