What Key Principles are Driving Your IT Budgeting Process?
This post serves as the second installment following my presentation at the Portland Regional Chamber about “Effective Strategic IT Planning”. In my first post on this topic I spoke about four pervasive and generally false myths around IT strategic planning. With that information under our belts, I am going to focus this post on the five key principles that should drive your IT budgeting process. While budgeting is usually not a favorite activity, a clear and realistic budget planning process can often make or break your fiscal year. A successful IT budget should always be driven by strategic business goals. Most importantly, they should be measureable, repeatable, accountable, and managed by the right level of leadership—whether those people are internal or external. While all of this sounds simple, I am consistently shocked at how many businesses do not craft their IT spend around their own strategic business objectives. This planning disconnect would be like designing a car without taking into account the fact that the tires will one day touch the road.
I advise our customers to look at their IT budgeting in two distinct budgets: Capital Expenditures and Operating Expenses. While these buckets are certainly not new to anyone in a budgeting cycle, it is prudent to bring clarity to these two categories. Earmark Capital Expenditures for any special projects outside of your day to day needs. (Hardware, software and networking needs as well as any training or audits.) Your Operating Expenses are recurring items you can’t live without. These include application maintenance, support contracts, cloud services, security and compliance needs and general managed IT support (help desk, antivirus, etc.)
With these two buckets in mind, you can now focus on the five key principles that should guide your budgeting process:
- IT as a Business Strategy. Everything that happens in your IT budget is driven by your business initiatives. Regardless of your industry—healthcare, animal health, retail, manufacturing—you have goals and quotas to meet each day, month and year. View your IT investment as a key asset in achieving these goals, whether it’s delivering the most seamless, accurate and secure healthcare services or selling the most gallons of heating oil to your customer base in a safe and secure fashion. All of your IT planning should be done part in parcel with your business initiatives.
- Enterprise Architecture. The organization of infrastructure, data and applications should be in place to achieve business standardization and technical integration. What does this mean? Do all of your (often expensive) applications work with one another efficiently and correctly? Is your CRM system working with your ecommerce software? Can your employees quickly and easily find and access documents they need that are mission critical to your business? If there is a delay in your work flow and it is technology related, then it’s time to reconsider your strategic IT partner.
- IT Infrastructure Strategies. Does your internal IT team or external IT partner have a strategy for delivering IT as a reliable service? If your employees are grumbling about the lack of help desk support, network outages or problems in accessing shared data then there may be a need to address the overall IT delivery strategy.
- Business Application Needs. Buy or build. This is a constant discussion in organizations looking to line of business applications to address business requirements. While any software development organization can likely build an application for you, the implications and requirements in building before buying need to be fully understood and vetted before a decision is made. It is almost always cheaper to buy an off the shelf application and customize, especially if you can meet your business requirements.
- IT Investment and Prioritization. Do you work with your IT partner to follow a process for ensuring return on investment (ROI) and prioritization around technology investments? If you do not have a process around examining your IT investments or a plan for prioritizing both your capital expenditures and operational expenses, then you could be at risk for making foolhardy or unnecessary purchases.
If you feel as though you are fighting back the myths that I spoke about in my first post, or you are not developing your IT budget around these five key principles, then it’s time to speak with a trusted IT partner about getting an actionable, measureable and realistic plan in motion to take back control of your IT budgeting.
If you have questions, schedule a call with an expert.