At a recent conference for chief financial officers, participants and presenters appeared to agree that IT maintenance is more than a huge budget line for nondiscretionary spending. The consensus was that it's become something of a slush fund for virtually any costs that CIOs want to hide, from R&D skunk works to rogue projects. This assessment of maintenance may or may not be true at your company, but if your executives perceive it to be true, you've got an image problem. And if it is true, you've got a bigger problem.
Maintenance is "a huge black hole", says Robert Rosen, CIO at the National Institute of Arthritis and Musculoskeletal and Skin Diseases, and president of Share, an IBM user group. "I have not seen anyone taking a step back and saying, 'OK, we have all these systems; what does it really cost to keep these things running?'"
If you're used to sweeping wishlist items under the maintenance rug, experts say you're probably spending more than you should on initiatives that aren't aligned with corporate priorities or return-on-investment expectations. Moreover, without a clear view into what's being spent and why, you lose the ability to assess risks and assign responsibility.
Some CFOs and CEOs, driven by tightening budgets and governance standards, are demanding more details from their CIOs about the costs that fall under the maintenance header. The result is more transparency, which brings better accountability, smarter decisions on spending and, ultimately, more credibility for IT.
"More and more business leaders are demanding that accountability on the IT budget," says John Stevenson, vice president and CIO at Sharp Electronics. "IT leadership has to have a handle on costs, because the details of the IT expenditure are now being put on the table and they can't say, 'This is a black box'."
Long time coming
The current frustration with IT maintenance budgets isn't the result of an overnight revolution within the corporate hierarchy. Phil Murphy, an analyst at Forrester Research and author of a recent report titled, Stop Treating Maintenance as a Chore, says the situation has been building for years.
"Maintenance budgets are higher than they should be," Murphy says, but he blames that on shortsightedness rather than malfeasance. "I don't believe it's a 'let's hide the money in maintenance' malicious activity," he says.
"The thing that governs maintenance is political power," Murphy says. "There is collusion, but it's not at the level you think. It's not the CIO stockpiling money to hide."
He thinks that companies have been ignoring the maintenance mess as they have focused on promising technologies. That's one reason why many are spending 75 percent or more of their IT budgets on maintenance, Murphy says. "Now we have to pay the piper," he adds.
Maintenance budgets are also high because of something Murphy calls "leakage".That's when an IT staffer who's tight with a business-unit leader helps get the unit's wishlist project done "one bug fix at a time".On the pretext of fixing a system, they're really slowly converting it to a new system -- under cover, he says.
Part of the confusion arises because companies put slightly different items under the maintenance budget heading. Generally, it includes vendor fees and labou to maintain existing systems. It also includes costs for activities that keep the whole IT infrastructure running, such as fixing a bug or adding a user.