When Richard Wiedenbeck became chief information officer of Ameritas Life Insurance Corp. 12 years ago, he encountered a siloed business structure in which each business unit fulfilled its own information technology needs.

“IT was treated as back-office order-taking operation to an unhealthy level,” he said. “Businesspeople were making software application and design decisions who had no skill or qualifications to do so. One team had three developers who only knew SQL Server, so they had 45 SQL Server databases even though SQL Server wasn’t the answer for 80% of the problems they had to solve.”

Wiedenbeck, who has been a management consultant and run two software companies, knew that control was part of the problem. “If you don’t get the technology leaders and business leaders working together, the idea that one is leading and one isn’t can become a control construct, not an outcome construct,” he said. “Both sides are thinking about how to control stuff as opposed to how to achieve an end state.”

Now the company’s chief technology and transformation officer, Wiedenbeck has methodically worked to break down traditional definitions of which technology projects belong to IT and which to the business. “One of the first things we did was say there is no such thing as a technology project,” he said. Project sponsors can now be anywhere in the organization and any project is fair game to be pursued as long as there is a business objective driving it.

Ameritas’ democratized approach to ownership of IT projects is an example of good intentions creating unintended consequences. Business leaders who take control of their own IT need often lack the knowledge or discipline to manage applications as they grow, not to mention integrate them with other parts of the IT portfolio. At the other extreme is the more traditional model of budgeting in which IT controls the purse strings and decides how resources will be allocated.

Organizations are now struggling to come up with a middle ground that balances business responsiveness with discipline, accountability and security. One thing is clear: The central IT budget is evolving into a shared asset in a federated model in which business and IT teams both decide how it should be used.

The end of control

“CIOs can no longer take a command-and-control approach,” said Darren Topham, senior research director with Gartner Inc.’s Office of the CIO research group. The trend toward more democratized spending was dramatized in a recent report Topham authored that found that line-of-business leaders in the average enterprise now spend more on transformative IT projects than the IT organization does.

Ameritas’ Wiedenbeck: “We had to lean into the uncomfortable conversations.” Photo: SiliconANGLE

Gartner found that half of business unit leaders with technical skills now think they understand their technology needs better than the IT organization does, Gartner reported. That has big implications for how the purse strings are controlled.

“Whereas traditionally the CIO’s role has been the go-to source of technology provisioning, it’s now having to expand to become the orchestrator of technology use across the organization,” Topham said. “CIOs need to change the nature of the conversation to be not ‘tell me what you want’ but ‘tell me what you want to achieve.’”

Ameritas’ decision to recentralize IT budgeting inside a new governance model wasn’t popular at first. “In the beginning, people felt I was taking control from them,” Wiedenbeck said. “We had to lean into the uncomfortable conversations. Data had to be the most important participant in the room. Get all the ugly on the table so the sides aren’t trying to expose each other’s ugly. I found that after doing that a few times people stopped throwing hand grenades and we started working together better.”

The technology budget is now mapped to a three-year plan managed by an executive team that “decides how big that bucket can be and it doesn’t matter whose budget it’s in,” Wiedenbeck said. “In the end, I don’t think business-led IT works any better than IT-led IT. They have to come together to build joint ownership, joint data management and outcome-based processes.”

It isn’t that IT organizations are spending less, but their role as primary spending arbiters is changing. About 70% of the formal IT budget typically goes to non-discretionary activities associated with keeping the lights on, leaving just 30% for uses that grow or transform the business, Gartner estimates. That means business units now spend more on strategic IT than IT does.

Guardrails needed

CIOs who were interviewed mostly welcomed the change, saying they are focused less on who controls spending than on ensuring that money is spent on the right things while basic levels of performance, security and data governance are observed. But they also said permitting projects to proliferate without structure and guardrails can turn into an ugly mess.

Gartner’s Topham: half-finished projects are like puppies that become big and expensive over time. Photo: Gartner

Gartner’s Topham agreed, saying there is a tendency for line-of-business leaders to hand off ownership of partially completed projects to IT without sufficient attention to such issues as integration, interoperability and security.

“Non-IT technology creators always think they’ve got a solid vision of what they need but that’s never what they’re building,” he said. He likened half-finished projects to “owning a puppy, where 18 months later it’s big and expensive, so they say to IT, ‘Here, you take it.’”

That’s a problem but also an opportunity, said Thornton May a futurist, educator and author who works extensively with CIOs. “It used to be hard for CIOs to surface demand signals from the business; we’d build systems and they wouldn’t come,” he said. “The business now understands that you can do cool things with tech but they don’t know how to do full-cycle value creation. They screw it up and call for help.

“Everybody is playing in IT now, but everybody also has responsibility,” May said. “People who are doing it all by themselves will fail.”

Global engineering firm Arup US Inc. has kept its IT spending centralized but initiated chargeback policies about five years ago when “we realized there were business teams using their credit cards for Amazon Web Services,” said CIO John DiCamillo, who joined the provider of global engineering services a decade ago. The policy is meant to keep business users accountable for what they spend while gaining some economies of scale. “We do this for synergies, better alignment for best practices and reducing redundancy and waste,” DiCamillo said.

The shift to the cloud has created a greater need for accountability, he said. “In the past, we’d buy and depreciate and hold that cost; if someone needed more processing, we’d spin it up for them,” he said. Under the cloud operating expense model, “we may have to charge now because overhead costs continue to rise.”

Although budgeting is centralized, business units get considerable leeway to decide how money is spent. “It’s about bringing the necessary technology to our clients, so if there’s a particular piece of software required, we’ll work with them to get it,” he said. “We haven’t had to worry about business units going off and doing their own thing. We joke that if our office leaders ended bagel Fridays there’d be more of an uproar than centralizing technology budgets.”

IT balancing act

Arup’s DiCamillo: Chargeback policies provide for “better alignment for best practices and reducing redundancy and waste.” Photo: LinkedIn

But central control can be an illusion if controls are overly restrictive. When Gartner asked CIOs how much “shadow IT” – or IT spending that isn’t accounted for in the budget – was costing them, most said 5% to 6%. “The business unit heads said it’s closer to 36%,” Topham said. And such spending often doesn’t show up in budgets. “We’re finding the spend outside of IT is almost exclusively discretionary spending,” he said.

At Arup, DiCamillo believes that centralized budgeting combined with accountability means that “we know what’s out there. The only way individuals have been able to purchase on their own in the past has been through a corporate credit card or the finance department,” he said. “If there’s a technology charge on someone’s expense report, it’s reviewed to be sure it doesn’t conflict with our strategy.

“It’s not a control thing,” he added. “We can give them what they need and if they have different requirements, we can usually work through that.”

Not all IT organizations can pull off that balancing act. If the relationship between the technology group and the business has long been strained as it has at many companies, Topham said, “the CIO is often set up as the bad guy because that’s the person who says you can’t deploy something yet because they need to spend another three months looking at non-functional components to make it work.”

Trust equation

IT organizations that are seen as overly heavy-handed or unresponsive have a harder time building the necessary trust to make a federated model work. “The trend is definitely around business users feeling empowered to want to move fast and if they feel IT will partner with them, they are willing to do that,” said Vishal Gupta, chief information and technology officer at Lexmark International Inc. “If they feel that IT will slow them down then here’s their credit card.”

May: CIOs need to be a business leader’s friend, dad and priest. Photo: Thornton May

Lexmark takes a hybrid approach to budgeting, with funds allocated depending on the nature of the projects. Some groups have more latitude than others. “We have a strong marketing team that has the ability to stand up e-commerce themselves,” Gupta said. “We decided we’d rather not constrain them from the vendors they select” as long as any solutions they develop are integrated with back-office systems, security audits are performed and they work with a common tool the company uses to monitor availability and performance. “That makes sure they don’t get stuck or lose customer data,” Gupta said.

At Ameritas, trust has been built by speaking a language the business understands. “Part of the success we’ve had is because we didn’t come at it from the tech perspective but used language about making good investment decisions and achieving value,” DiCamillo said.

But a touch of fear also helps. To avoid being handed projects that are half-finished or that have major gaps in areas like security and compliance, Wiedenbeck said, “I keep an example list of projects in which we leaned into something someone wanted and it didn’t turn out well. Those become the examples that build trust.”

CIOs said transparency and communication are critical, particularly is spending authority is undergoing changes. “Communication and collaboration has been our success in making sure we don’t have people lining up with pitchforks and torches at my door,” DiCamillo said.

Futurist May said loosened controls over IT spending mean that “the CIO has to be the most trusted person in the enterprise. They have to be the one the business side comes to when things get out of hand, their friend, their dad and their priest.”

Align around what’s important

Lexmark has adapted its governance structure to give business leaders a more pronounced role. Last year, the company created a digital transformation steering team as a top priority at the board level. “We let the digital transformation steering team drive the top priorities for reduced churn and better visibility into existing investments,” Gupta said.

Lexmark also created centers of influence and spread some of its technology staff throughout the organization. It partnered with an artificial intelligence academy to train over 40 aspiring data scientists, with more than half coming from outside of IT, Gupta said. “They get an appreciation for the power of technology instead of listening to me just parroting the benefits,” he said.

IT also built a data lake with the goal of letting business users experiment with ways to mine value from data. “We created it and let the citizen developers and data scientists leverage it to make key business decisions,” he said.

Tech projects also aren’t all judged by the same criteria. Those that are expected to yield incremental sales are evaluated in terms of the cost of goods sold. “If I’m enabling incremental revenue, then that’s important and something we want to scale,” Gupta said.

This year the company defined seven different areas of strategic IT investment and created a roadmap that identified quarterly milestones. “We worked with the stakeholders to understand what success looks like,” Gupta said. Lexmark has also initiated standardized desktop imaging to minimize complexity and give everyone most or all of what they needed.

“If we’ve aligned on 80% of the things that matter, such as our [enterprise resource planning] and back-office systems, it helps us accelerate digital transformation,” he said.  “We have business partners in key areas to ensure we have clear alignment on what we’re going to do.”

Photo: Photopin