Investing in Technology is Essential to Business Progress: Determine Your Funding Model
By Irv Rothman, President and CEO, HPE Financial Services
Ask any CEO what is demanded from them today and we’re likely to say business transformation. From the largest Fortune 100 to the mom-and-pop shop around the corner, there is a clear imperative to innovate. As has been widely acknowledged, technology is a strategic lever for business progress. It is the nature of strategy; however, investment is required for implementation—and therein lies the challenge.
Truth is, funding transformation is not so easy. Innovating beyond the limits of incremental IT investments and small budgets is complex, time-consuming, and unpredictable. I often speak with organizations in the midst of this quandary. These are well-established companies (like yours, no doubt) with experienced leadership, satisfied customers, and stakeholders eager to move ahead. When it comes to developing a funding model to drive IT transformation, the question I typically hear is “How do I get started?”
Though industry disruption (aka the “Uber effect”) may grab your attention, what you’re additionally up against is the competitor next door. Easy to forget amid the hubbub and media buzz, competitive disruption can quickly snap up your market share. IT budgets are growing at a snail’s pace—two percent of annual revenue on average. Despite the need to fund innovation, the majority continues to disappear into the money pit known as legacy IT. This means you have to be as inventive as possible in creating financial capacity for new IT investments.
The traditional one-size-fits-all model has given way to more flexible options for you to acquire, pay for, and use IT. The good news is that your organization is likely sitting on an investment base that can be monetized to transform legacy IT. The process of doing this moves your IT from a complex mass of application entanglements (known as “technical debt” by most CIOs) to an innovation engine. Together with investment strategies structured around your KPIs, fixed budgets open up to become virtual and expanded budgets that fuel growth. Risk can be managed, costs matched to revenue, balance sheets better optimized, and true cost of use established.
Determining which funding model will serve your business best can be a complicated question. As a fellow business leader, I can tell you the process won’t be easy. But it will be worth it. Bear in mind, every journey begins with the first step.