The Naked CIO: Why boards get IT spend so wrong

Sound infrastructure projects often fail to win board backing because of flaky ROI demands. But come up with a hare-brained scheme and boards fall over themselves, says the Naked CIO.

Over the past week I have been consulting various interest groups about the capital budget for 2009. These discussions mark the beginning of what I affectionately call the silly season.

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The season always follows the same pattern: we have to decide the best way of spending money to drive the organisation forward but get no useful input or understanding from the board.

My CEO reacted to certain architecture expenditures I put forward as if I were asking for elaborate light fittings. His perspective was, if the existing lamps give off light then why spend money on new fixtures? What we were actually discussing was upgrading an email system.

I have been told all capital requests must provide a minimum of 15 per cent ROI. Yet the company has no established measurement of ROI post project.

While we try to create these measures, any assertions on ROI remain pure speculation and completely unattainable in conventional terms for many aspects of IT.

As part of the budget exercise, I went back over some return-based assumptions made the previous year. In one case I found a software development that delivered 10 per cent of its projected sales revenue.

Yet no one remembers this. To many in the organisation the development is seen as a resounding success. This pattern represents the rule rather than the exception.

The only possible conclusion is my company doesn't care about real ROI but just wants to be able to justify the initial capital outlay.

In all my time managing capital budgets I am always astounded at the arbitrary way funds are allocated and by the ridiculous justification for some of the spend.

Speculative, IT resource-hungry schemes with little chance of realising their potential are almost always chosen over foundation technology projects that seek to make networks and systems more reliable, resilient and functional.

As part of my preparations I examined last year's customer satisfaction survey. Critical comments from employees overwhelmingly centred on reliability and performance of existing systems. That response is entirely consistent with my approach: I advocate innovation but only so long as it forms part of sound development and IT strategy.

So I find it hard to rationalise why speculative, risky and often unrealistic projects should take precedence over environment projects that service current needs. You fix leaks in the roof and holes in the wall before building the extension.

Nevertheless, infrastructure projects represent wasted spending in the eyes of a boardroom where most do not understand the impact of this type of initiative.

Board members are often sold on unrealistic - in some cases even irresponsible - projects that hold out tantalising dreams of making money. Yet these projects almost always end up losing the organisation much more than it gains.

So tell me this: how do I stimulate innovation yet convince our board that spending on critical services and infrastructure is as essential to growth and customer service as speculative new ventures?