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The perils of the defunded initiative

IT-driven products and internal systems are frequent targets for defunding. While defunding may be a fact of life, doing it incorrectly can cost your organization more in the long run.

As the economy continues to sputter around the world, defunded initiatives have become a fact of life in many organizations. With IT-driven products and internal systems frequently having high implementation and ongoing costs, these are frequent targets for defunding, and many IT shops have been faced with little more than a "keep the lights on" budget over the past several years. Obviously, executives and IT leaders alike would prefer to fully fund every meaningful initiative, but reality frequently requires difficult choices. While defunding may be a fact of life, doing it incorrectly can cost your organization more in the long run.

Running for the hills

In the worst case, initiatives are defunded suddenly and without any planning. Skilled resources move on to other projects or leave the organization, complex systems are undocumented and under-maintained, and even basic maintenance to hardware and software may go undone. When an initiative is mothballed without any prior planning, restarting costs become painfully high, since the organization must effectively relearn how to develop and maintain the IT system. In the worst case, restarting costs can exceed the amount of money saved by defunding the project.

While it might be tempting to simply "pull the plug," deactivating or "hibernating" even moderately complex IT initiatives requires planning and careful management. While it may be tempting to immediately reallocate the scarce resources dedicated to a defunded initiative, take some time to consider the following:

Plan the work

Defunding an initiative should be treated like any other major initiative, complete with a business case, project plan, and regular monitoring. While it may seem odd to create a business case to shut something down, a brief business case details the rationale behind defunding the initiative and spells out the intent for the initiative going forward. Are you aiming to keep the product functioning at some basic level? Are you completely shutting down the project? If so, how will you determine who gets the human and technical resources freed by the project? Similarly, it's worth documenting what conditions might trigger refunding the initiative. Is there a key customer constituency or market condition that would trigger "reactivation"? Detailing the business rationale behind defunding also makes the case for spending some money to wind down an initiative correctly, in order to save money in the long run.

With a business case in place, an appropriate project plan can be created to ensure that organizational know-how associated with the defunded initiative is captured. Even if the initiative is being completely scrapped, there are likely components and knowledge that can be leveraged elsewhere. If the initiative will be reactivated at some point, craft a "reactivation plan" while the knowledge and skills are fresh in everyone's mind, saving time and money later on.

Budget restart scenarios

As part of the business case and financial analysis around the defunding, model a few scenarios around the cost to reactivate the initiative. While the initial plan might be to defund only for a matter of months, model what might happen if the product remains in limbo for several years. Will it be particularly costly to rebuild some technical skill or organizational competency? Will there be a large cost to update infrastructure, particularly as support expires or platforms reach end of life? As part of your annual planning progress, refresh these financial models and factor them into your budgeting. It might make sense to shift resources or consider scrapping a "hibernated" product rather than continuing to fund minimal care and feeding year after year.

With careful planning and some minimal spending up front, defunded initiatives can be wound down, with knowledge captured and the restart costs well documented. Combine this with a brief annual review of mothballed products, and executives can readily understand the costs to restart, or continue minimal "keep the lights on" funding.

About

Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...

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