Gartner: business units to get more control

Gartner Inc. analysts recently predicted that business units will gain control over a majority of discretionary spending on technology this year. If that happens, it could force IT departments to meet project milestones set by business managers before they get funding to pay for additional work.

Some attendees at Gartner’s Symposium/ITxpo 2003 conference in San Diego last month said they don’t expect that scenario to play out in their organizations, at least in the short term. But other IT executives said they have already seen the trend emerge – and it has been to their advantage thus far.

“I’m already seeing some of that occur in our organization, and it’s helpful,” said Craig Betts, director of enterprise resource planning and distribution technology at Sierra Pacific Resources in Reno, Nev. Although Sierra Pacific has shifted control of IT spending only to a few business units, Betts said the change has helped his company’s IT department by giving business managers responsibility for planning and overseeing IT project requirements.

“When we own everything, I have to handle the budget, and if the business units aren’t aligned with IT, they hand everything over to us,” Betts said. Without direct input from business leaders on their IT needs, keeping requirements-planning efforts on track is “a shot in the dark,” he added.

An IT spending shift also has started at Industry Canada, according to Sean Barr, industry sector officer for the agency’s Spectrum, Information Technologies and Telecommunications Gateway division.

“It’s been good for me and our business unit when it has occurred, because there’s more of a direct path for funding,” Barr said. “But I can see how this could be a problem for other CIOs.”

Carl Schulz, an IT consultant at Delta Corporate Services Inc. in Parsippany, N.J., said a growing number of companies are giving business units control of discretionary IT spending – the money above and beyond what’s needed to run day-to-day IT operations. Schulz said he has also seen business units “place their own people in an IT organization to oversee spending and manage projects.”

But other IT managers at the conference said project purse strings either remain in their grips or have even been returned to them.

“We started taking back control of some IT spending that was taking place in business units, where (rogue) ‘IT entities’ had cropped up,” said an IT manager who works for a branch of the U.S. military and requested anonymity. “In some instances, business units will receive funding for IT projects and direct that to us.”

Some companies have taken approaches that combine IT and business-unit control over spending. Four years ago, The Northwestern Mutual Life Insurance Co. began moving to a funding model in which business-unit leaders sit on a corporate planning board that decides on all discretionary IT spending before funding is allocated to the IT department. That setup “has worked out very well for us,” said John Hillmer, director of technology services at the Milwaukee-based insurer.