A well thought-out IT budget for your business is a successful marriage of fiscal responsibility and technological strategy. I prefer not to think of an IT budget in a similar school of thought as a personal finance budget. I like to use the term Technology Plan, and rue the word "budget" which implies the intent of deriving meaning from dollars and cents (In my mind anyway). Adopting a technology is often more about value than merely the cost of the licensing or equipment. Technology value is based on the adoption rate, integration across systems, and migration vs. deployment; which emphasizes IT cost reduction and optimization of dollars spent.
In the past, the trend of the CFO was to make decisions on Technology spending in terms of Internal rate of return (IRR) or Net Present Value (NPV), but without having insight into the company’s technology focus, these investments could cripple the company to their competition or actually raise costs the following year. The approach for developing a Technology Plan (IT Budget) should not be a "make it fit" dollars and cents exercise, but instead a cooperative collaboration that includes ongoing management.
Good management of your IT vision can lead to 30 - 50% savings for the organization1 in overall cost optimization of IT investments. Most organizations do not plan properly for their Technology Plan (IT Budget), in fact, in a recent poll of 420 IT professionals; 31% of them planned next years’ budget in the last quarter, and another 31% had no standard budget planning dates at all2. Below I have listed some basics for creating a Technology Plan (IT Budget) that will help put you in the top management bracket to save 30-50% on IT.
Get Started
Start Now - Anything is better than nothing. At the end of this blog, I have added couple super basic excel sheets you can use to start recording costs and tracking performance on your investments.
The IT Pro's Job
As an IT professional, it’s your job to find the dollars and cents. That means you need to explain the technology and why the investment is a good idea. Example: Office 365 is a great idea for our company because we cut expensive update cycles with exchange servers; we cut costs with hardware procurement and management, and simple administration means I spend less time troubleshooting database availability groups and more time helping end users. IT Professionals should tell the story and explain the value. Use hard data.
Draft It Out
I say this all the time in our office, the process needs to start somewhere don't expect the first time you run through it to be perfect. Shoot for at least 25% improvement each time you run through a process. After three or four times it becomes much more difficult to find 25% improvement.
IT Budget Examples:
#1 - The first time you draft your IT budget it may look something like this:
| EXPENSE TYPE |
2013 |
| Employee Salaries |
10% |
| IT Support |
48% |
| Assets |
23% |
| Unexpected |
19% |
#2 - The second time you have prepared and tracked more data you might get something more like this:
| EXPENSE TYPE |
2013 |
2014 |
PROJECTED 2015 |
| Employee Salaries |
10% |
13% |
20% |
| Application Support |
48% |
11% |
Cloud : 30%
|
| Application Licensing |
27% |
| Networking Support |
10% |
| Datacenter Equipment |
23% |
13% |
19% |
| End User Equipment |
10% |
20% |
| Service Contracts ISP |
0% |
1% |
1% |
| Planned Contingency Rollover |
19% |
18% |
10% |
Obviously you can build an arsenal of data that allows for chargeback to departments, cost per unit on servers, workstations, network, and service desks. The end goal should lead to a total platform cost and business dependency mapping. As an IT professional, this will allow you to find cost savings in technology integration and migration paths.
One of the fastest ways to find cost reduction and optimization is around cloud solutions – just make sure the licensing makes cents! Get it? See what I did there?
Download Sample IT Spreadsheets
1 Spend Less on IT, Drive More Value: Sanil Solanki, Gartner
2 State of IT Budget Report Spiceworks 2014 Budget