In the wake of a long recession that has prompted so many organizations to mercilessly slash their IT budgets, and with IT budgets finally relaxing and growing, IT budget planning is as hot a topic for CIOs – and for their entire organization – as it has ever been.
As a forward thinking Chief Innovation Officer, your goal is to defend your budget levels, and – hopefully- build the case for increased IT spending. But planning your IT budget is a stressful task. You’re expected to accurately forecast IT spending and budgeting needs for the coming year. There are important decisions to make: How much should you spend on infrastructure maintenance and how much on innovation? And speaking of innovation, what are the hot new technologies you should be spending on?
You already know how to budget within your own department. The challenge is to work that budget so that it aligns with your organization’s business goals. IT budgets should always meet the strategic demands of the business. Your best course of action is to work with the CFO and align your IT budget with the overall business strategy for the coming year.
But wait. What if a smaller IT budget serves the needs of your company better than a bigger budget? It CAN happen of course, though unlikely to after the deep budget cuts we’ve seen over the past three years. However, even if it does happen, there’s a silver lining: you should feel free to take the credit for shrinking that IT budget with your smart IT investments! After all, your goal is not necessarily a bigger IT budget. Your goal is smart, focused spending that brings real long-term value to the organization.
As for the IT budgeting process itself, whether your budget is going to grow or not, you should always look for places to trim waste, in order to open opportunities for new growth and for investing in new, disruptive technology. You want to minimize your investment in infrastructure maintenance and free up as much of the budget as possible for supporting major business goals.
In order to accurately plan your IT budget, you will need to create a budget based on actual current usage, combined with historic unit costs for all IT financial management services, while also taking into consideration current business demands AND future business goals. Just as important: once the budget is implemented, you should continually track actual usage vs. the planned budget, and to re-forecast as needed, as the business changes and evolves.
Needless to say, IT budget planning can be extremely time-consuming and error-prone, since there are so many moving parts to the equation, including business objectives, demand, cost drivers, allocation rules, and new technology.
While this causes some to claim that IT budget planning is “more art than science,” I think it can actually be more science than art. We talked in the past about how IT budgeting, while seemingly a daunting task, becomes quite doable when you use the right tools. Of course, it’s nearly impossible to create an accurate IT budget using manual methods or tools such as Excel and Access. But with the right IT Budget planning tools, it can be done, and the resulting budget can be extremely reliable and accurate.
Armed with an accurate IT budget, you will be well prepared to make the most out of it and prove, again, that smart investment in new technology is the best way to move the company forward and achieve its most important business goals.
