Moving money to the left

Fact: “[Microsoft’s internal] IT organization now spends almost 45% of its budget on new product development, as opposed to maintenance and ongoing support, a notable improvement from 30% in the past.” [source]

Analysis: An increasing challenge for our enterprise IT organization at DIA has been optimizing our performance to the point where we can take money out of operations & maintenance (O&M), and invest it instead in innovation. Why? The intelligence business demands change, reformation, and dramatically improved capabilities. Intelligence isn’t alone; at Gartner’s annual Symposium last December, “driving Innovation” was promoted as an absolute business imperative, and infrastructure consolidation and optimization was billed as a primary enabler to disinvest in tired old-school technology, allowing re-prioritization in innovative approaches.

It all comes down to moving money to the left, earlier in the enterprise IT life-cycle.

According to one internal study, some government agencies are still devoting up to 80 percent of their IT dollars to “keeping the lights on” and maintaining legacy systems. That leaves as little as one-fifth of the total pie for new approaches, investment in innovation, R&D, and nimble development of new IT solutions to enable change and improvement on the business side.

Microsoft’s CIO Stuart Scott, who revealed the quoted fact above at this week’s InformationWeek 500 conference in Tucson, has been turning his annual IT spend into a strategic capability for the company’s leadership — now IT is less a cost center, but increasingly an arena for enterprise-modernization. Only 55 percent of the IT spend now goes to O&M, versus 70 percent in the past. Microsoft’s CIO shop is approaching the tipping point of spending a majority of its money on innovation (new product development) in support of the company’s 90,000 employees and contractors.

At the conference, Microsoft’s COO Kevin Turner said he’s not satisfied; to Scott, he chided: ““I’d like you to be up around 65 percent application-development spending.” That would presumably put the CIO’s organization smack in alignment with the company’s actual “business side” – the core Microsoft activities of designing and productizing new software.

How does a CIO accomplish that transformation? Nuts and bolts. Scott says he’s cut 1,000 applications from the inventory used internally at Microsoft, and from the remaining 2,500 applications he hopes to cut yet 1,000 more as unnecessary or duplicative. He’s also driving consolidation among data centers, having gone from 26 to 5, financing even more strategic investment.

DIA and other government agencies are following the same model, with concrete payoffs. But a CIO has to be constantly pushing, pushing, pushing – shoving the money to the left.

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4 Responses

  1. Don’t know if you’ve seen the latest on Microsoft’s CIO – let go for some unexplained “violation of company policies” … could be the euphemistic personal indiscretions? Doesnt’ take away from his work I guess – I found your site by searching for more info on his track-record after reading about his sudden fall🙂

  2. Thanks for the tip. I’m uninformed on what’s going on with that.

  3. […] written about the balance between smart central enterprise planning, and innovation before; I do believe that the one can lead to the other.  It ain’t necessarily so, of […]

  4. […] In government-agencies particularly (and many torpid commercial enterprises also), budgeteers make the mistake of throwing money at legacy systems instead of being bold and prioritizing research for the next generation of systems. (Last year I wrote about these issues in ”Moving Money to the Left.”) […]

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