This article focuses on the dilemma arising when the high costs involved in running legacy systems and applications eat up the bulk of IT budgets, leaving (too) little room for CHANGE projects. The article ends with our experience in this matter.
Leading IT analysts such as Gartner have indicated in many studies that RUN costs can represent as much as 60% to 70% of a CIO’s budget. While it appears that 30% to 40% of the CIO’s budget remains for CHANGE projects, this is not always available for business transformation projects as mandatory, regulatory-driven projects have priority. At the same time, the CIO is confronted more and more with the business requiring rapid “sprints” to support client-, value-driven changes while legacy IT applications – which lack agility – prefer to support a “marathon run” (cf. Gartner’s Bimodal IT).
So what can a CIO do when facing such budgetary dilemma? Options are:
Before zooming in on our experience in this matter, let’s briefly look into each of those 4 options:
“Whatever you do, don’t call the fire brigade” can be a silent motto if and when:
While RUN costs may increase, as well as the difficulty to manage hundreds of change requests related to back-end applications running on legacy systems, a lack of sense of urgency may lead to the CIO’s preference not to embark on a transformation project at this point in time.
This option will however be difficult to sustain as soon as:
As a CHANGE project – such as an automated legacy migration project – can take 1 to 2 years to complete before RUN costs can be (drastically) lowered, the pay-back point may be reached in year 3 or 4.
As a result, such project generally requires multi-year budgeting and a value analysis/business case. While a time horizon beyond 3 years is not always obvious in publicly traded companies, it is more common in privately held businesses.
While option 2. is feasible from a financial perspective, there may be other reasons to convince the Executive Board that such multi-year budget is required, such as:
When the “house is on fire”, it is necessary to call the fire brigade meaning that pure financial and human resource motives are insufficient. This is the case when:
In such case, a policy decision to lower risk on the so-called “IT debt” is (over)due.
In many cases, it is wise for the CIO to involve the Executive Board with respect to the planning and value analysis of a (large) transformation project – such as a mainframe re-hosting project – as such project does require the top leadership to stick out their neck as a team and support the CIO with multi-year budgeting, a policy decision, and/or change management.
While short term financial gains may not always be feasible for the business, the decision to embark on such a transformation project – if well-implemented – will benefit the business both financially (through lower costs) and commercially (through more agility) while lowering IT-related risks going forward.
If the company is willing to share relevant costing data with us, Anubex can help to run such value analysis with a goal to underpin decision-making.
Luckily, in more than 30 years of experience in legacy migration projects, Astadia did come across many CIO’s who had the vision and guts to put such transformation project on the leadership table. As we understand that this can be the start of a “pilgrimage”, we always stand ready to support the CIO and his/her team with respect to technology choices, value analysis and change management. Our experience also shows that CIOs appreciate that we are able to:
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