Given the murky economic outlook, budgetary efficiency is an increasingly important part of every IT leader’s job. In fact, according to “The State of Enterprise IT Budgets: 2008,” a March report from Gartner Inc., 75% of enterprises say improving the efficiency of IT is a critical or high priority.

Think you have the budget covered? So did many others, who nonetheless found themselves explaining missteps that cost hundreds of thousands — even millions — of dollars.

Here are some of the things they learned not to do:

1. Always say yes. Acceding to constant demands can send the budget spiraling out of control, says Mike Gorsage, a partner and regional technology practice leader at Tatum LLC, an Atlanta-based executive services and consulting firm.

Gorsage cites the case of a hospital where the CIO worked under a directive to fulfill all requests. “The senior executives told IT if someone needs something, just get it done,” he says.

As a result, planned projects accounted for about 10% of the $100 million budget, while unplanned work sucked down a staggering 30%. And just over 60% went to maintenance. Best-practices models indicate that 70% should be spent on maintenance, 25% on planned projects and only 5% on unanticipated demands, Gorsage says.

The tipping point came when IT suffered a costly failure on a big project — a failure that stemmed from all those helter-skelter projects, Gorsage says.

“Finally, the CIO and senior management figured they had to put in strong governance, but it took six or seven months of pain to get that done,” Gorsage says. The new rigorous approval and planning process brought the hospital’s IT spending closer to that 75/25/5 split.

Read the rest at ComputerWorld.