IT budgets should be more focused on R&D, growth

October 20, 2014

It's common to talk about a department as if it is one homogenous body – the marketing department, the human resources department, the IT department. This is, however, a reductive way to look at things.

Every functional area of a company competes with every other area for budget allocation. But on an even smaller scale, there is competition within departments for money and resources. For example, within an IT department managers must decide how to allocate their budget for functions like research and development, operations and other tasks.

The budget is a key management tool and is alpha and omega when deciding what the priorities of the individual department and the company as a whole will have. While one could argue in favor of almost any area in terms of who should get the lion's share of the resources, there is one particular function that companies should invest in more heavily.

Where companies get the biggest bang for their buck
Network Computing reported that 66 percent of IT budgets get spent on project launch initiatives. The remaining funds are then divided between system maintenance and research and development – about 17 percent of the budget for each. This is unfortunate in light of the fact that many companies derive up to 70 percent of their income from research and development initiatives.

It's not farfetched to imagine that investments in new technologies for the IT department being a key driver of company growth. But with so many expenditures devoted to maintenance and day to day operations, it can be difficult to find a way to allocate more funding toward research and development, even though many acknowledge that it is critically important to company growth.

Simplification and planning the key
Despite the challenges of freeing up budget resources for research and development, it would be worth it for companies to find a way to free up valuable dollars for investment in new technology.

As ZDNet reported, one great way to do this is to simplify and streamline other areas of the IT department. In the never-ending battle between company growth and maintenance, this can be a way to tip the scales in favor of investments in growth.

"Our operating budget is the portion primarily driven by infrastructure/desktop support and telecom. We have an active program focused on simplifying our technology stack. This will allow us to invest more in enabling technologies by reducing our operating expense," said Martin Schneider, the CIO of VF Corporation

Additionally, Network Computing noted that managers should do more in the planning process when deciding which projects to take on. By implementing more stringent planning and testing measures early on, IT can prevent wasting time and money on projects that may not have a great impact.