3. Plan and spend locally. Local control guarantees that local needs are met, but it adds significant costs to the bottom line. Just ask Randy Headrick, director of communications and information and CIO for the Air National Guard (ANG) at Andrews Air Force Base in Maryland.
Headrick says the ANG didn't have a central budget or procurement process for its IT network, so buying decisions were left up to individuals at each of its 88 bases and 250 smaller units.
"We were heading toward a network that wasn't congruent," Headrick says.
It was also becoming increasingly costly.
Since he centralized budgeting and procurement in 2007, Headrick has been getting better volume prices He also has a more secure infrastructure that's easier and cheaper to maintain because components are standardized. The ANG is spending about 30 per cent less for the same capacity than it did under the distributed process.
"We have a stronger, more secure, more robust, more current network, and it's not costing us as much money," Headrick says.
4. Don't plan for business intelligence or reporting. "People underbudget BI and reporting needs. They focus on the processes, and they think they can get back to the reporting," says John Larkin, a former CIO who's now a partner at TPP Global Services.
He once worked with a company undergoing a US$3 million ERP implementation that also called for operational control-type reporting and dashboards for operational monitoring.
Project leaders assumed that the bulk of that work could be done by internal resources, but they failed to consider that they were tied up on implementing the new system. As a result, the company had to spend US$600,000 on consultants to handle the BI and reporting requirements, Larkin says.
"It's hard to get a major project like ERP justified, so there's a bias toward assuming that the internal resources can do more than they can," he warns.
5. Bank on big savings from overseas outsourcing. Many in IT have yet to learn that there's a limit to the savings offshore outsourcing can really deliver, so they set unrealistic expectations, relying on inflated figures or best-case scenarios that are too good to be true.
Larkin says he worked with one midsize company that had based its IT budget on expectations of a whopping 60% savings from sending application and maintenance work to India.
When the actual savings turned out to be 20 per cent to 30 per cent, the IT execs were left scrambling to squeeze money from other places to cover budget overruns.
"Clearly, getting an experienced adviser, getting benchmarks and talking to others could help get more accurate numbers," Larkin says.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.