What is technology budgeting?
The amount of money spent on an organization’s information technology systems and services, is known as IT Budget. Technology Budgeting is the process of allocating monetary resources to various IT programs. These could range from recurring expenses like hardware leases and staffing to expenses dedicated to a fixed-duration project or initiative. In some companies Technology budgeting is primarily an annual exercise, while other companies might demand budgets for each initiative as it arises.
Components of IT Budget
- Compensation for IT professionals including costs for external consultants used by the IT department
- Expenses related to building and maintaining enterprise-wide and back-office systems
- Hardware expenditures; bills for laptops, organization-issued mobile devices, servers, routers and other networking equipment, data center expenses and bills for cloud platforms.
Many Organizations struggle with Technology budgeting, also known as IT Budgeting. This happens because the IT team doesn’t understand the budgeting & accounting process whereas the finance team doesn’t understand IT. The organization should change their approach to Technology budgeting from merely an annual exercise to a meaningful planning and ongoing management process. The organization’s leaders should work together to define IT’s role in achieving the organization’s objectives—converting IT from a cost center into an investment.
Use of Technology Budgeting
IT budgets should address 3 categories of IT spending:
- Capital – Expenditures need to be considered as part of the organization’s capital budget like purchases of hardware and large software licenses, significant repairs, parts replacements and major software upgrades.
- Operating – Expenditures are related to operations like subscriptions, maintenance and support for hardware and software.
- Project – Expenditures are tied to a discrete effort. These expenses are flexible part of the IT budget; they can be accelerated or pushed back depending on cash flow or other events.
With advancements in consumer technology, IT teams are pressured to provide user-friendly corporate software and hardware. CIOs are allocating part of their overall IT budget towards customer interface solutions. CIOs are allocating more of their IT budget towards innovation and business opportunity compared to on mandatory investments and maintenance. IT organizations are allocating some of their IT budget for cloud Computing. Organizations are too conservative when determining the flat rate for IT staff growth. CIO’s role will extend beyond IT and they are taking on non-IT responsibilities, such as procurement. Departments like HR, Finance, Operations and Marketing within any organization are allocating a large percentage of their budget to technology. The business leaders are depending on technology to meet their objectives.
Inspira Enterprise – Leading IT Solutions Provider in India, has got the expertise right from consulting to deployment on any IT related projects or advanced technology. Here are few tips we would like to share with our readers.
Tips for Annual Technology budgeting & planning
- Prioritize – Decide on what products or services should be upgraded? The most important thing to be considered is an organization’s “need” when it comes to technology. E.g.: If server is on its last legs or software is no longer supported, it’s time to upgrade it or you will suffer greater costs such as losing data if the server dies, or an information security breach if your software no longer receives patch updates and bug fixes.
- Modernize – Decide on which new technology will be a strategic investment? Keeping organization functional and effective means staying ahead of the technology curve. Need to pay a larger price up-front for the latest and greatest service to save more money in the long run.
- Commitment – Organization should invest time and money into properly training users. Especially when adopting a new system or service, user training will make or break an investment. If users are not adequately trained on the new technology then organization will miss out on many features that would enhance workflow, communication and effectiveness.
- Support & Maintenance – Organization should provide adequate support for technology. Staff using the new software or service are not the only ones who require training; IT support staff require a working knowledge of the technology’s back-end to troubleshoot bugs or any issues that arise. Organization should have a contract with third party service provider for support to ensure consistent service and response times.
Back-up Plan – Organization should have a disaster recovery plan for technologies. Note down the average lifespan of a new piece of equipment and have a timeline, along with a long-term budget in place for replacing the unit. Before buying technology, organization should thoroughly research the product.