The more strategic you are in planning your IT expenses, the more cost-effective your organization will be. Do you know what’s involved in an accurate and effective IT budget?
Are you worried about your IT budget?
It’s OK to be concerned. Whether you blow past it every year in additional support charges, or keep overinflating it because you assume your upgrades will be more expensive, it can be difficult to determine exactly what IT will cost you.
In this article, I’ll explain why this process is important, and what’s involved in an effective IT budget. These best practices will help you develop a more accurate budget for your organization.
Budgeting is obviously essential as it provides what you need to run your company.
Without the proper appropriations, you could end up short on what you need to meet your customers’ demands and your business goals. You budget for other expenses like office rent, utilities and supplies, and so, beyond this, you need to identify how you’ll need information technology to operate your business and execute your initiatives.
Consider your budget as a validation and support tool for your overall IT strategy. It will be the benchmark and cornerstone for your overall strategic IT management. A good IT budget will give you the ability to manage technology costs for both the short and long term. It will also give you the agility you need to adjust IT expenditures when changes come about.
Companies of all types and sizes struggle with IT budgeting. This is because the financial side of the business doesn’t always understand the technology that employees need to do their jobs efficiently, securely and productively. And the IT team and employees don’t always understand the process of budgeting. The common ground, however, is when both parties look at the IT budgeting process as an investment in your organization’s future.
Budgeting is the process of allocating money to various IT services and solutions. These could be recurring expenses like Managed IT Services where you pay a monthly fixed fee for an all-inclusive service plan. It should also include the hardware and software you’ll need to either purchase or lease on a monthly, per-user basis.
For most companies, IT budgeting is an annual process. However, if unexpected IT projects come up, you may need to revisit your budget. Some view IT budgeting as a wish list of funding for every possible scenario. They see it as one big pool of money, when, in fact, an IT budget comprises many components including capital, operating and project categories, and other types of expenditures such as hardware, software, subscriptions and services.
A good IT budgeting process is similar to personal financial planning. Both processes establish short- and long-term goals. It considers account spending and other constraints. It examines the “human” impact and analyzes strategies to determine the approach that aligns best with business goals while minimizing risks.
Start by establishing various categories depending on the complexity of your operations and the extent of your requirements. Here’s a very basic example of some of the categories you should consider:
A long-term outlook is best in any case. Assess your IT budget’s financial impact not only for the current or upcoming year but also for future years where IT initiatives might be affected. You don’t want to “balance the budget” for this fiscal year, only to run into unintended consequences in years to come. A good IT budget balances both short-term and long-term requirements.
When you employ a strategic approach to IT budgeting, you’ll have a planning and decision-making tool that will ensure you maximize the benefits of your technology investments.
However, knowing about IT budgeting and actually making it happen are two very different things. If you don’t have an internal IT manager or a CFO to handle this for you, you may not have the knowledge or time on your own to manage the process effectively.
Our team will help — put our expertise to use to budget your IT more effectively. Here’s how it works: