August 29, 2007

Financing IT Improvements

Trading Operating Expense For Capital Expense As A Strategy

by Craig Symons

with Alex Cullen, Bo Belanger

Executive Summary (This is a document excerpt)

The average IT organization is being squeezed in the vice-like grip of maintenance and support of ongoing operations. As much as 80% of the IT budget is being consumed by these activities, leaving only 20% for strategic initiatives and innovation. This is an untenable situation, yet there is no easy way out. A small number of organizations are taking an innovative and bold approach to their IT budgets by investing capital expense to offset high operating expenses. The result is bigger upfront cash outflows with a long-term favorable impact on operating expenses and positive contributions to the income statement albeit with a higher level of risk.

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