The Bane of Centralized IT Budgeting

This process is inherently adversarial. It’s also frustrating everybody using it. Turning again to Strategic Trends in Information Technology, respondents ranked inadequate funding as the No. 1 limitation to getting more from IT in their organizations (medium to large firms across various industries).

This is the tragedy of the commons coming home to roost. If business decision-makers controlled their own IT budgets, part of their natural decision process would be to weigh expected benefits against expected costs and decide whether it was worth spending scarce dollars that way. But with centralized IT budgets controlled by IT, there is no natural constraint on the business decision-makers to keep them from asking for all the IT they can get.

And, really, it’s ever worse than that: Many executives intentionally ask for more IT than they need or want at the start of the budget cycle. They know that they will need some negotiating chips as during the budgeting process. What a mess!

Fixing the Problem

The ideal fix is to leave IT money in the hands of the business units and let them buy their IT wherever it makes the most sense. Then the internal IT department becomes just a service provider rather than service provider and keeper of the treasury. IT gets to focus on IT and on being competitive against outside competition. And the business gets to focus on the business and not on pleading its case and negotiating.

Barring the ideal, however, the only choice is to rely on traditional band-aids: business-IT steering committees, constant negotiation and renegotiation, “rogue IT” (unsanctioned IT controlled by a business unit), and other methods that are part of the current state of antagonism and frustration.

Seemingly free IT guarantees the tragedy of the commons. It’s up to us to decide whether we want to keep on paying the real cost.

Chris Pickering is president of Systems Development, Inc., an IT research and consulting firm. He also is a senior consultant for the Cutter Consortium. His latest industry survey, Strategic Trends in Information Technology, is available now. He may be reached at [email protected].

Editor’s note: This column first appeared on Datamation, an site.