How Shadow IT Can Help CIOs Minimize Costs

by CXOtoday News Desk    Jul 16, 2014


Smart CIOs can use shadow IT as a way to pioneer digital initiatives without making compromises to their IT budget, suggests Gartner. Shadow IT is a term often used to describe IT systems and IT solutions built and used inside organizations without explicit organizational approval. These are solutions used and deployed by departments other than the IT department and often seen as a threat by the CIO. Gartner suggests this presents an opportunity for the CIO to work with their management team, especially with the IT asset managers, so as to harness the digital business, while keeping costs to the minimum.

In most cases is that shadow IT gets into the way of IT budget where CIOs and their management teams can struggle to pay off life cycle technology debts left by failed or superseded digital technology initiatives, believes Stewart Buchanan, research director at Gartner. “IT asset managers must help CIOs select the most sustainable digital business initiatives, which will attract enough funding to cover their full contract or asset life cycle costs,” he says.

To help IT asset managers best manage these challenges, Gartner has developed a three-stage IT asset management engagement plan for digital business.

Stage 1. Establish an early role in digital business initiatives to ensure that all the costs of scaling successful projects can be covered

Acting in an advisory role on every technology procurement and risk management assessment will make CIOs far more influential than running a few digital business initiatives at their own financial risk. They should aim to become digital risk mitigators, leading a team that everyone in the business wants to consult for help and advice on digital business initiatives. IT asset managers must help business leaders learn from their mistakes, even if the business initiatives prove successful.

Stage 2. Manage life-cycles to ensure that digital business costs are funded beyond the initial investment

Despite being expected to promote digital technology by business users, experienced IT managers are selective because they have a more realistic understanding of the long-term costs, risks and benefits of technology. Whether acting as an internal service provider or a broker for external providers, the CIO could be reluctant to buy more technology than they can sell on to business users in return for budget. In such a scenario IT asset managers can help their CIO select digital business initiatives that will attract enough funding to cover their full contract or asset life cycle costs.

Stage 3. Share financial risks with business sponsors and external providers to ensure they are committed to paying

CIOs need to develop new funding methods before they can hope to access the digital technology elements in every business budget. IT spending on digital technology is at risk because business users are often better negotiators than the IT service managers who depend on them for funding. Direct engagement with suppliers ensures that the business sponsors behind each digital technology initiative will cover their costs. IT asset managers understand where long-term business costs are being created, costs that cannot be covered by short-term cost recovery.

CIOs should determine how best to share these costs with the business by identifying who should ‘own’ the IT organization’s assets. A common strategy is to encourage lines of business to run pilots and experiment with digital innovation, ready for the CIO to scale and industrialise them when they prove suitable for longer-term adoption. As a result, CIOs can control and manage these services without ever taking ownership of their contracts or assets.