Funding Tomorrow's Applications
In my previous blog, I argued for expanding the scope of 'modernization' to include new technology capabilities like Mobility, better UX and Cloud. These actions are necessary to keep the portfolio up to date and relevant to the changing business environment. While the 'rip and replace' option is always available, a more prudent financial option would be to make changes to existing applications and thus leverage the investments made so far.
But a fundamental question that dogs every IT organization is where to find the money to fund the projects for building new capabilities. In my experience there are broadly three ways to finance such modernization initiatives:
- Business Funding - This is the primary source of funding for most application modernization programs, where there is a clear business case for bringing in new capabilities. New business realities will demand new capabilities that will receive appropriate funding. For example businesses like restaurants and event rating/booking, travel reservations, that are facing a customer base that is increasingly moving their spend to mobile handsets will be forced to find the money to extend their websites to mobile platforms.
- IT discretionary spend - IT departments typically have a set amount of discretionary funding available to them to spend on different improvement activities. In boom years, this budget can be substantial and can support multiple modernization tracks. However, in recent years most organizations have found this budget to be shrinking year on year and is currently only sufficient to keep the critical projects going. Projects that are removed/replaced out of support application layers, shutdown applications with newer alternatives etc. will continue to be funded via. this route, as these are almost mandatory expenses for IT
- Self-Funding - This is perhaps the most innovative yet difficult to achieve model. The investment for new technology interventions is sourced from reducing the spend on portfolio. The savings can be achieved by rationalizing the applications and technologies in the portfolio. Savings can also be brought in by moving to a managed service model for supporting the applications. For a self-funding model to work, the savings must be retained within the IT budget. The challenge with this model is finding the initial dollars to carry out the rationalization. This model needs a flawless business case and a detailed plan to manage the changes that will affect the program during its life-cycle
While market forces will provide the biggest impetus for building Tomorrow's Applications, it is important that IT leaders consider the various other ways to fund the needed improvements. Infosys has a strong framework in Value Realization Method (VRM) to create a compelling business case. Our IMPACT framework provides a full framework to manage the program. These help us create the right sources of funding for the programs to sustain themselves over many years.