Conforming to Regulations Vs. Long Term ROI

In the complex web of today's regulatory environment, firms scramble for resources to conform to the regulations. Firms typically start out with a good, broader vision to overhaul their processes & IT systems while trying to meet the regulatory requirements. But over a period of time, they realize the complexities of working across multiple teams and understand the true impact of the regulations. Unfortunately, by this time the budget allocated for the regulatory compliance initiative would have overblown. The executives scramble for recovery, sudden budget cuts are announced, IT teams are downsized and a lot of useful IT assets/codes that had caused the budget overflow are kept in the parking lot (and probably never used again). Short term view of conforming to the regulations overtakes the long term vision for streamlining operations. But is this good for the long term health of the organization? Certainly not.
Firms sacrifice long term operational efficiency for meeting immediate budget constraints. But in the longer term, as a result of throwing away most of the work (e.g:IT assets) done, the firm ends up overshooting the budget when measured over a 5 year period. Multiple IT vendors and their sponsors within the organization also contribute to duplicate assets being built, resulting in a lot of "throw away" assets. The key reason causing such a behavior is the tradition of allocating IT budgets on a semi annual or annual basis. Rational IT budget allocations should be done over 4 or 5 year period, with provisions for adjustments on an semi-annual or annual basis, depending on the complexities that arise. When ROI is measured over the longer term, the stakeholders make better decisions regarding the resuability of assets and prioritize the budget allocation accordingly. Long term budget allocation also promotes reusable thinking, enabling the IT teams to build reusable assets, so that even in the event of a budget cut, the assets could be reused at a later stage. The IT strategy should allocate resources based on a service oriented model, be it for IT applications or processes. While it is good to have multiple competing IT vendors vying for IT work, firms should have a central business and IT architecture teams that set the architectural road-maps preventing duplication. The business architecture should drive IT architecture and with it, the IT road-map. The IT initiatives drawn out of the IT road-map should dictate IT applications that need to be built. The development and deployment of the IT applications can then be allocated to the IT vendors, to keep the costs down. The ROI should be measured at two levels - individual application level and at the level of portfolio of applications identified in the IT architecture. When budget allocation is set and measured on a long term basis based on the business architecture, the true value of re-usability/sustainability can be captured.
Conclusion: Allocating IT budgets and tying them to a portfolio of IT applications, based on the business and IT architecture, over a longer period of time promotes sustainability and re-usability within organizations.

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