If you are like every other small to medium size business out there finding time to spend thinking about your IT budget is a necessary evil. Or, you might work with a Managed Services Provider to create one.
Often what is missing from this process is the strategic thinking that links IT investments with the creation of value.
Value is created when a company can maximize productivity, performance, and cost savings. It is important to budget and plan for IT expenditures accordingly.
Some useful questions that should be factored into the budget process:
- Are their adequate funds available to fund IT initiatives?
- Who in the organization will be the point person to collect relevant information? Is there an
in-house CIO or does this fall to the finance team?
- What are the company’s strategic goals aligning IT with business needs?
- Is there a Technology road map that goes beyond one year?
- How much should be spent on maintenance vs innovation?
At a line item level it is important to identify and include costs for the following:
- Capital Expenses (Cap Ex) (Sometimes its own budget)Capital Projects such as moving your environment to the Cloud
- Investments in premise based infrastructure
- Operating Expenses (Op Ex)
- Warranty and License renewals
- Software compliance purchases
- Service and support contracts
- IT head count payroll and related employee expenses
- Internal IT employees’ wages and payroll burden
- External outsourced IT resources (Consultants and Service Providers)
Budgets need to have some level of flexibility in order to factor in unanticipated events.
For example, the company’s largest client goes out of business and revenue is 15% lower than in prior years. How does that impact the original budget and what areas of spending (Cap Ex and OP Ex) will be impacted?
Some budgeting practices to avoid:
- Locking in on a fixed number i.e. “the IT budget must be X percentage of revenue.”
- Not factoring training as part of budget.
- Ignoring newer technologies because they cost too much.
- Saving budget spreadsheets locally and that are not backed up.
- Not standardizing budget processes between departments for consistency.
- Waiting for something to break before putting a replacement cost in the budget.
At TNS we work collaboratively with our client’s to ensure we provide guidance and help develop IT Budgets that align with corporate goals and objectives. Our team is focused on providing clear technology direction with an eye towards the future.