The Renewal Nobody Questions

The second year is where the money actually goes, and it's the year nobody examines. · Juan Vegarra

Every dollar of new spend gets examined. Almost no dollar of continuing spend does.

I learned this properly during a cost review at a company I was advising. We cut the new-request list hard. Felt rigorous. Then somebody pulled the list of what was already running and it was four times larger, and roughly a third of it nobody could explain.

Not fraud. Not waste in the obvious sense. Just things that had been approved once, in a context that no longer existed, and had never been asked to justify themselves again.

How year two works

Year one of an initiative gets a business case, a sponsor, a review, and attention. Everyone is watching.

Year two gets a line in a spreadsheet. The line is smaller than the year-one ask, because the setup cost is behind you, so it draws less scrutiny. It carries the implicit authority of having been approved before. And questioning it means questioning last year's decision, which usually means questioning a colleague.

By year three the line is furniture. People inherit it. New finance staff assume it was examined by someone competent, because it's still there.

The compounding is the point

A four hundred thousand dollar initiative that should have stopped after year one doesn't cost four hundred thousand. Over five years it costs two million, and that's just the invoice. Add the people assigned to it, the integration surface it occupies, the vendor relationship it sustains, and the option value of what you'd have done instead.

This is why I care more about the renewal discipline than the approval discipline, even though approval gets all the process. Approval is a one-time decision. Renewal is where the money actually lives.

Make renewals earn it

The mechanic I've seen work is simple and unpopular. A renewal has to be argued as if it were new.

Same form, same bar, same question about which number it moves. The sponsor doesn't get to reference last year's approval as evidence. They have to show what happened since, in the unit they promised.

Most sponsors hate this the first cycle and stop minding by the third, because the discipline cuts both ways. When their initiative is working, the renewal review is the one place they get to prove it in front of people who control budget. Good initiatives do well under this. It's the ambiguous ones that suffer, which is the entire idea.

The exception worth carving out

Infrastructure shouldn't be run this way and it's a mistake to try.

Data platforms, integration layers, governance tooling — these are capability bets with long payback and no clean annual number. Forcing them through an annual outcome review either kills them or teaches people to fabricate attribution, and fabricated attribution is worse than none.

So split the two explicitly. Capability spend gets multi-year patience and milestone review. Use-case spend gets annual outcome review and a real chance of dying. What you can't do is blend them, because the blend lets weak use cases hide behind strong infrastructure and lets weak infrastructure hide behind whatever use case looked good that quarter.

On Monday

Print what's renewing in the next ninety days. For each line, find the person who can say what it's produced since it started.

Where there's no such person, you haven't found a renewal. You've found something that stopped being a decision a while ago.

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Juan Vegarra is the author of An Outsider’s Playbook. The views here are his own. More essays · Advisory · Write me