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7 Components of a Successful IT Budget

Posted by Henry Cheang | December 26, 2014 7:00 AM

It’s Boxing Day!

Well, it’s Boxing Day, the day of bargains! I hope that you all had a great holiday yesterday, and that you’re relaxing and/or out getting some good deals at your favourite store. It might even be a good time to stock up on tech for the office. Don’t laugh – at one of my previous jobs, the boss actually bought four workstations on Boxing Day. It made sense – he saved nearly $2,000 that day!

That last part is one of the key parts in having a successful IT budget – good purchase planning for hardware. There are others, though. I’ll go through them after taking a couple of steps back!Stretch IT Budget!

Overall IT Spend and Budgets Trend Upwards

So, a quick bit of background. By now, you’ve heard us often say that IT Spend is on the rise. It still holds true: It will rise 3% each year between 2015 and 2018. What you might not know in detail is, well, the details of that spend:

  • Studies of IT managers in North America, Europe, Middle East, and Africa showed them to spend an average of $253,389 on IT
  • In 2015:
    • 16% plan to make cuts in their IT spend
    • 28% expect to keep it the same
    • 42% plan to increase it
  • IT cost small businesses $2,770 per employee
  • IT cost large businesses $698 per employee (note the $2072 difference!)
  • Much of the new spend is on cloud and virtualization services
  • Despite all this, the average number of IT staff is staying put at 4.2 employees per department. People aren’t planning on hiring more IT professionals.

All of the above findings are largely echoed by a separate Deloitte study. Basically, there’s no avoiding the fact that there’s a growing need for better IT resource planning and use because the number of IT staff will stay the same (or maybe even shrink). So, where do we start?

Building a Good Foundation: Get the Right People Involved and Encourage Accountability!

First, we have to know who to involve in planning and implementing this budget. This changes from company to company, but there are points in common no matter where you work. You really do need upper management (including CFOs and even CEOs) to buy-in and cooperate with the IT-specific folks (i.e., CIOs and IT managers). Good planning starts with good leadership; you won’t have that if the actual leaders don’t take active roles.

The other half is to plan for everyone else to be involved at the ground level. I’m talking, of course, about transparency. Now, the average employee does not need to help directly plan the IT spend, but they should be made aware of how much they each cost the company in IT spend and be encouraged to reduce their inefficiencies whenever possible. You promote a culture of IT cost transparency so that you can target and eliminate future inefficiencies before the fact. You encourage accountability, which will reduce IT spend and help you stretch IT budget.

You also need to have a realistic view of the budget’s target date. Plan to spend up to 6 months on building two budget roadmaps: One for the next year and another the 2-3 years after that.

7 Components of a Successful IT budget

So, with the groundwork done, you can now move on to the actual budget itself. What are its components? Well, you have to plan spending for at least the following elements:

1) Hardware – This includes consideration of all physical equipment and tools used for work:

  • Computers
  • Telecom – landline and cell phones, etc.
  • Printers
  • Wiring (yes, that’s something we can’t forget to cost)
  • Other physical electronics

2) Software – All the programs that run on your devices. Remember that software firms are stepping up their software audits. Make sure that you’ve budgeted money to pay for any software you use – better to pay for it the first time around rather than be fined later down the road for using unpaid copies…

3) Subscriptions and Services – And 2) applies for software that is licenced and paid for every month or year instead of a software bought on a one-time basis.

4) Capital – Goods and/or non-financial assets used to produce the firm’s products.

5) Operations – The costs incurred while running a business (although in this case, it’d be the IT portion).

6) Projects – Costs associated with specific tasks.

7) Rainy Day Buffer – Lastly, money should be set aside for unforeseen expenses. They will happen, no matter how well we plan.

Follow-Through for Success: Stick to the Budget

So, you have the groundwork and the elements of this budget. You’re not done though. You have to also make sure you stick to the budget, and constantly check that your spend makes sense as new developments surface (i.e., a new disruptive technology, sudden market shifts, etc.)! The budgeting process can only be viewed as a success:

  • If you keep your spending limited to your planned guidelines;
  • If you make sure your ROI on the IT spend is worthwhile; and
  • If you make adjustments in response to big changes.

Remember, just going through the motions of planning isn’t enough. Strange though it may sound, the budget should be viewed as a living thing more than as a static, unchanging decree!

I hope that this has been a useful bit of year-end advice! If ever you need more help, contact us at Cimpl! We’re Canada’s leader in IT and telecom expense management – we’ve helped companies manage IT expenses and stretch IT budgets for 15 years, and we know that we can help everyone work smarter! Happy holidays!

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Topics: Cost Transparency, Work Smarter, IT Budget, Software

Written by Henry Cheang

Henry has a lifelong passion for science and technology. This enthusiasm is put to good use in a cutting-edge software company like Cimpl. As product marketer, Henry researches market and user needs to develop user and buyer personas, contributes to product design, and helps coordinate product messaging. Henry also writes nearly the entirety of all documentation for Cimpl’s many successful platforms. In his spare time, Henry devotes much energy to family, friends, and martial arts. Henry recently completed his Master’s in Business and Administration from Concordia University, where he specialized in the study of marketing, organizational behavior, and corporate governance. He has authored academic papers on the latter two subjects; these papers form part of his bibliography of over 20 professional research publications.

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