How much cash have you freed up for innovation?
CIOs are not able to innovate because of the huge burden of maintaining existing applications, according to a survey.
While IT budgets shrink, CIOs are bringing less value to the business because of the increasing proportion of cash they must spend on what is known in the industry as ‘keeping the lights on’.
Indian IT services firm HCL Technologies commissioned a survey of 300 British and American CIOs, finding more than two-thirds of their budgets are spent on running the business.
Of that, 38% was directed at application support and maintenance (ASM) – equivalent to $11.3m per business per year, based on the annual IT expenditure of Fortune 2000 companies.
HCL’s senior VP, Vijay Iyer, told CBR that the consequence for IT is that it misses out on opportunities to adopt new technology.
He said: "It is frustrating for a CIO who’s using 70% of the budget to run the business leaving just 30% available for transformation.
"CIO with all the changes happening in mobility, analytics, newly emerging technologies, they don’t have enough money to spend because it’s locked up in maintenance."
ASM spend can be on various applications from sales software to enterprise resource planning (ERP) technology.
HCL’s survey found that 45% of organisations managed ASM in-house, while 17% outsourced this function.
The remaining 38% stated that ASM was carried out by both an in-house team and an outsourcer.
While 83% said they wanted to cut the costs of running the business, the survey highlighted that one of the biggest barriers to cutting ASM costs was a reluctance to disrupt the status quo.
But Iyer claimed that if CIOs adopt a strategy or solution to better manage ASM, they could cut ASM costs by 30%, freeing up more money to invest in innovation.
"If you have 100 people no longer doing application support they can be delivering 20 or 30 valuable ideas a week," he said.
"CIOs need to be able to drive costs out of their operations, while at the same time drive business performance. This can be enabled by using business-focused KPIs."