Archive for the ‘IT Budgeting and Planning’ Category

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.

Are you tired of the mantra “Doing more with less?” You probably are, but it’s unlikely to go away anytime soon. While the economy is slowly recovering, CIOs continue to face pressure to adapt to a changing business climate in which IT cost optimization and doing more with less are the norms.

As a CIO, you’ve probably seen drastic cuts to your budget during 2008 – 2010. In 2011, your budget will likely be flat. The drastic cuts of the past three years are thankfully over, but your budget is not exactly growing.

And yet, the demands on that budget are growing. No longer satisfied with seeing most of the IT budget go to traditional IT tasks such as infrastructure and operations management, your CEO now expects you to spend most of your time – and limited budget – on driving innovation and growth. Essentially, you must deliver more value and innovation – without spending more.

The way to do that is of course to drive down costs – especially the costs involved in infrastructure and operations management, freeing up as much of the budget as possible to support business goals. Addressing critical business needs with limited resources means you must have a crystal clear view into the exact cost of IT, enabling you to make the right business decisions – and be compelling as you explain them to the CEO.

General cost cutting or quick, temporary solutions will not work as a long-term strategy. Cutting across all IT services could hinder growth. You want to pinpoint the exact areas where you can cut without hurting business goals. In 2011, as you work to continue innovation and add business value while keeping in line with a tight budget, major yet precise structural cost-saving steps, rather than general temporary cuts, are the way to go.

Enabling IT to do more with less means making drastic changes to the way IT departments are run. It means taking those budgets and making the most out of them, not allowing any waste whatsoever. Tight, efficient budgets require tight, continuous monitoring and optimizing. In 2011, do more with less by relentlessly optimizing your IT budget, driving down maintenance costs and freeing money for the tasks that will help your company – and your career – grow. Remember: companies today want innovation, and innovation often happens through technology.

I’m on my way to Frankfurt for some prospect meetings. There’s nothing I love more than that, except for my wife and daughters, obviously.

I got a gift from my travel agent – a guide of museums in cities across the world. Well, I was never big on art, but in the last few years I started getting into it so I will go visit the STADELSCHES KUNSTINSTITUT UND STADTISCHE GALERIE after the meetings in Frankfurt.

I often hear from customers, when talking about IT Cost budgeting and planning or IT demand management, that it is more art than science. Since I don’t think I will find any IT budgets displayed in STADELSCHES KUNSTINSTITUT UND STADTISCHE GALERIE, it is probably a good idea to share with you how IT Budgeting and Planning or IT Demand Management can become a science. It is very simple, if you know:

1. What IT services or “capabilities” you provide.
2. What are the detailed cost models of the services you provide.
3. Key historical metrics: Volume of a specific IT capability per revenue, per HC, per customer, per transactions etc. all by organization, by region, and so on.
4. Historical unit cost per IT capability and how it trends based on value.
5. Business Units, business objectives for the coming year, growth in HC, revenues, transactions etc.

Take all of this, mix it up, throw it on a canvas and you have a great budget…oops ART.
Just joking.

With all of the above you can truly accurately prepare a good, detailed IT budget.

I have seen it happen at many companies, Nationwide, Koch Industries, Volkswagen, Cummins engines, UBS, P&G and many others. Sounds like a lot of work? Well, some create amazing spreadsheets and some use a system – it’s your choice.