No one looks forward to IT budgeting. No one. Budgeting is a fact of life and part of ensuring that IT is leveraged to support the overall initiatives of the enterprise. An IT budget must both drive and support strategic initiatives so a clear roadmap of business-wide objectives is critical to effective planning for future efforts.
Sometimes the urge to just update last year’s budget can be an easy solution. We get that. Tech departments can be overburdened and extra time is as rare as a Browns Super Bowl appearance. Unfortunately, just updating an old budget likely won’t appropriately incorporate new directions for the business overall. Strategic objectives change each year and IT has to keep pace or the business will struggle to achieve goals.
While IT dollars are expected to be invested in technologies that drive future growth, there are plenty of businesses that continue to put money towards their digital transformation journeys.
A simple way of starting an IT budget is with the basics as follows in this IT Budget Cheat Sheet:
IT Budget Cheat Sheet
Staff and compensation
- Recruiting and staff acquisition
- Internal staff
- External staff (staff augmentation providers and contractors)
- Total compensation (benefits, training, travel costs)
- Client computing resources (laptops, tablets, etc.)
- Network infrastructure
- License and support renewals
- Utility power
- Battery Backup and Generator Costs
- Support/Maintenance contracts
For each project
- Consulting expenses
- General and administrative (temporary office space, etc.)
The state of IT budgeting for 2020
In 2020, IT budget spends will be diversified over a much broader range of categories (e.g., digitalization, mobile computing, employee training, agility, flexibility, ability to work from anywhere) than in 2019, when IT budgets were heavily invested in security and cloud services as many major operating systems approached end of life. Security and cloud services will still lead investment categories, but many organizations feel they have attained many of their initial goals in these areas. It is critical to do what’s right for your company.
There are indications that more organizations want to fully understand just how much they spend on IT across the company. From a budgetary standpoint, this has sparked a movement to consolidate more of the IT spend (and assets) under a single umbrella, with IT in charge.
In response to the mixed performance of ROI formulas and cost overruns, CFOs and other IT budget decision-makers will likely expect more input from proof of concept exercises and successful trials before approving funding for new technology expenses.
Critical tech investments for 2020
Critical initiatives to consider for 2020 funding include cybersecurity, automation, infrastructure and data. Business confidence in dealing with threats is growing, however how businesses decide to allocate funds to tackle cybercrime may potentially change.
As predicted, businesses across verticals have begun to invest more in automation technology. Leveraging automation to eliminate mundane and repetitive tasks enables employees to engage in more meaningful work that helps drive business objectives.
The vast amount of data created from the Internet of Things devices has driven businesses to think about the value that can be extracted, and this is showing up in the IT investment decisions made by businesses. As an example, IoT provider, AGT International, works with industrial clients to manage and protect infrastructures through IoT analytics including video analytics and sensors.
Who should be involved in IT budgeting?
Despite enterprise desires to consolidate spends and asset tracking in IT, Shadow IT and end-user engagement in technology purchasing decisions are still very much alive. What has changed is that more end-users (and management) want IT to actively engage in preliminary technology decision-making processes. This ensures that the technology they want to buy can be used with other existing systems.
A good approach for IT is to take the lead by visiting various user departments in advance of budgeting to see what types of technologies they’re considering for their own business operations.
The role of the CIO in budgeting
Savvy IT leaders will demonstrate the value provided by their budget. Impactful areas of note promote internal and external objectives, from greater stability and operational efficiency to enhanced customer experience and assurances of a secure platform used to conduct business.
Great CIOs understand the balance sheet and P+L ramifications of investments made by IT on behalf of the company. Effectively leveraging the appropriate expense categories (cap-ex, operational expense, amortization, and financing options) and working with a CFO or other financial decision-maker ensures that spend aligns with the financial goals and capabilities of the organization.