We have all heard the taxonomy of RGT (Run, Grow, Transform) which are a combination of spend metrics that help drive a greater investment in "growing & transforming" the business whilst optimizing spend in "running or maintaining" the business. This is a good and valiant goal. However, it's not quite as simple as one might think to execute against it. It can create dynamics that lead to short term decisions with a risk of failing to achieve strategic needs of the business in the long term.

Let me explain.

In order to grow and transform the business, it generally means increasing investments in Information Technology to support the needs of additional employees, new markets, & new capabilities to deliver products faster and better. Whilst this doesn't necessarily mean a linear growth in IT investment, unless there are significant negative economies of scale due to Moore's law (where growth in IT is more than offset by cheaper products), it does mean a larger infrastructure footprint whether it be in data centers, compute, storage, applications, databases, support, end users, cloud, and networking.

Unfortunately, these increased investments have to be maintained with the expectation that infrastructure functions to a similar standard of performance as they did the day they were purchased (leased, subscription or otherwise). And in many cases, this maintenance is outsourced which creates its own challenges given that these agreements do not have the visibility that makes up the costs even though on first sight, the costs seem to be less.

Every year, operations are required to try and squeeze out more savings to maintain IT by squeezing vendor prices or driving efficiencies which over time become more and more difficult to maintain. IT works to negotiate agreements that reduce prices in the 1^st year, stop/reduce SLA's, or delay deployments of critical services e.g. patching, deployments, moving to the Cloud, and doing UPGRADES. This can easily be forgotten or just conveniently ignored by business leaders, largely because they want to focus on the here and now and not the past.

It is interesting to note that Upgrades are not explicitly called out in the "Run" part of RGT or maybe this was done on purpose. What you can't see, you don't have to address. 

At annual budget time, no one wants to mention it and no wants to hear it. It's like it's the "black sheep of the family". It's like saving money in your marketing budget in year 1 which is easy to do. Just don't advertise. But eventually, this may have a significant effect on the company's ability to grow. Well, it's the same with IT. IT can push cost out to a later date quite easily in the first year, with leadership all high fiving that they were able to do this. And then conveniently forget until next year comes around and pressure starts to build as infrastructure can't keep up and competitors are over taking them. These decisions can ultimately and ironically lead to less investment in grow and transform at the most critical time.

In my experience, approx 5% of IT spend should be invested in Upgrades in any one year and unless there is a shift in technologies or in the pricing of said, it's important this is invested in on a consistent basis. You don't want to have to invest 15% in year 3, when IT and end users cannot consume all the changes in one year, and the budget wouldn't allow it anyway. It's critical to build this into the annual budgeting process to the point that RGT, become R'U'GT. Plus the likelihood is that in year 3, not only will you have to invest at least 3 times as much (and it may be more), the loss in productivity and capabilities in the meantime may have an even more significant impact, albeit unmeasurable.

#ApptioforAll

This requires serious thought, @Dominic Calvert-Lee.

From what I have seen, businesses are often more interested in 10-year ROI analyses than in serious yearly budget exercises. I heard it last week: "Next year's budget? Whatever we had this period, plus inflation."

True, mixing short- and long-term planning is kind of an art.

I'll see what I can come up with and write a blog post about it.​

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Regards, Guillermo
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Original Message:
Sent: 09-01-2022 15:56
From: Dominic Calvert-Lee
Subject: The forgotten child of RGT – U for Upgrade

We have all heard the taxonomy of RGT (Run, Grow, Transform) which are a combination of spend metrics that help drive a greater investment in "growing & transforming" the business whilst optimizing spend in "running or maintaining" the business. This is a good and valiant goal. However, it's not quite as simple as one might think to execute against it. It can create dynamics that lead to short term decisions with a risk of failing to achieve strategic needs of the business in the long term.

Let me explain.

In order to grow and transform the business, it generally means increasing investments in Information Technology to support the needs of additional employees, new markets, & new capabilities to deliver products faster and better. Whilst this doesn't necessarily mean a linear growth in IT investment, unless there are significant negative economies of scale due to Moore's law (where growth in IT is more than offset by cheaper products), it does mean a larger infrastructure footprint whether it be in data centers, compute, storage, applications, databases, support, end users, cloud, and networking.

Unfortunately, these increased investments have to be maintained with the expectation that infrastructure functions to a similar standard of performance as they did the day they were purchased (leased, subscription or otherwise). And in many cases, this maintenance is outsourced which creates its own challenges given that these agreements do not have the visibility that makes up the costs even though on first sight, the costs seem to be less.

Every year, operations are required to try and squeeze out more savings to maintain IT by squeezing vendor prices or driving efficiencies which over time become more and more difficult to maintain. IT works to negotiate agreements that reduce prices in the 1^st year, stop/reduce SLA's, or delay deployments of critical services e.g. patching, deployments, moving to the Cloud, and doing UPGRADES. This can easily be forgotten or just conveniently ignored by business leaders, largely because they want to focus on the here and now and not the past.

It is interesting to note that Upgrades are not explicitly called out in the "Run" part of RGT or maybe this was done on purpose. What you can't see, you don't have to address. 

At annual budget time, no one wants to mention it and no wants to hear it. It's like it's the "black sheep of the family". It's like saving money in your marketing budget in year 1 which is easy to do. Just don't advertise. But eventually, this may have a significant effect on the company's ability to grow. Well, it's the same with IT. IT can push cost out to a later date quite easily in the first year, with leadership all high fiving that they were able to do this. And then conveniently forget until next year comes around and pressure starts to build as infrastructure can't keep up and competitors are over taking them. These decisions can ultimately and ironically lead to less investment in grow and transform at the most critical time.

In my experience, approx 5% of IT spend should be invested in Upgrades in any one year and unless there is a shift in technologies or in the pricing of said, it's important this is invested in on a consistent basis. You don't want to have to invest 15% in year 3, when IT and end users cannot consume all the changes in one year, and the budget wouldn't allow it anyway. It's critical to build this into the annual budgeting process to the point that RGT, become R'U'GT. Plus the likelihood is that in year 3, not only will you have to invest at least 3 times as much (and it may be more), the loss in productivity and capabilities in the meantime may have an even more significant impact, albeit unmeasurable.

#ApptioforAll