IT's Tragedy of the Commons

Whether the business units were able to get the IT they needed to achieve business goals often gets forgotten after the budget battles at the first of the year. Regardless, business and IT are being measured by different standards. It's no wonder they end up working to different goalsand feeling like theyre on different teams.

When you get right down to it, centralized budgeting for IT flies in the face of common sense. The business units generate revenue, and their day-to-day responsibilities keep them in touch with changing market conditions. They see the opportunities and they feel the pain of any mistakes.

From time to time they see the need for IT systems to support the business. Now the fun begins with a centralized budget. Our business decision-maker -- who made the money in the first place -- now has to go to IT as the keeper of the treasury for the money he needs.

Since IT is judged by whether it makes budget, it takes money matters seriously. IT's usual due diligence is to force the business to convince IT of the need for the proposed system through some formal review process. During the review IT will be constantly looking for ways to trim down, shave off, or otherwise reduce the cost of the proposed system -- unless the proposed system offers an opportunity to float some pet IT project using the latest gee-whiz technology. Then all bets are off.

This process is inherently adversarial. It's also frustrating everybody using it. Turning again to Strategic Trends in Information Technology, respondents ranked inadequate funding as the No. 1 limitation to getting more from IT in their organizations (medium to large firms across various industries).

This is the tragedy of the commons coming home to roost. If business decision-makers controlled their own IT budgets, part of their natural decision process would be to weigh expected benefits against expected costs and decide whether it was worth spending scarce dollars that way. But with centralized IT budgets controlled by IT, there is no natural constraint on the business decision-makers to keep them from asking for all the IT they can get.

And, really, it's ever worse than that: Many executives intentionally ask for more IT than they need or want at the start of the budget cycle. They know that they will need some negotiating chips as during the budgeting process. What a mess!

Fixing the Problem

The ideal fix is to leave IT money in the hands of the business units and let them buy their IT wherever it makes the most sense. Then the internal IT department becomes just a service provider rather than service provider and keeper of the treasury. IT gets to focus on IT and on being competitive against outside competition. And the business gets to focus on the business and not on pleading its case and negotiating.

Barring the ideal, however, the only choice is to rely on traditional band-aids: business-IT steering committees, constant negotiation and renegotiation, "rogue IT" (unsanctioned IT controlled by a business unit), and other methods that are part of the current state of antagonism and frustration.

Seemingly free IT guarantees the tragedy of the commons. It's up to us to decide whether we want to keep on paying the real cost.