This is the time of year when most organizations are putting together their budgets. It’s that awkward time of year when every manager is forced to sit in front of the boss and the finance people and justify every dollar being requested for their department.
The IT budget is particularly challenging because of the mutual misunderstanding that traditionally exists between the IT manager and the number crunchers. One side views IT as a strategic investment and the other views IT as a cost center. Both sides can be correct. With proper planning and budgeting, IT can deliver business value and improve the bottom line. But if you continue to build upon a foundation of complex and often obsolete systems and processes, IT will remain a misunderstood, inefficient cost center.
With organizations under constant pressure to do more with less, IT is critical to business success. Unfortunately, due to a lack of planning, 80 percent of the IT budget continues to be spent on keeping the lights on. Organizations need to make sure IT budgets support business goals, and they must be able to make a convincing case in order to rationalize these investments. Strategic IT planning and budgeting can provide a blueprint for your short-term and long-term IT needs and goals. This approach arms you with the accountability, fact-based analysis and reliable intelligence you need to guide your investments and communicate the value of these investments.
Although the first question is always about cost, it’s important to convey the value of IT beyond being able to provide each employee with a computer and an email address. IT helps you reach more customers, forge new business partnerships, build relationships, improve collaboration and provide better services. Internally, IT helps you improve efficiency, minimize risk, and devote more time to core business functions. It becomes easier to make a strong business case when IT budgeting is centralized and viewed from a company-wide perspective instead of individual departments with oversimplified line items.
Gartner’s “Run, Grow and Transform” model identifies key components of an IT budget:
- Run. These are the investments that keep the company operating, such as administration and maintenance, software upgrades and mission-critical server replacements. Cuts to “Run” initiatives increase operational risk.
- Grow. These are the investments that introduce new or improved capabilities and functionality, such as new collaboration tools or an enhanced security system. “Grow” items have a bit more flexibility and should be linked directly to business strategy.
- Transform. These investments are typically related to research and development. They help you introduce new products and services or improve your business model. “Transform” initiatives are often the first to be cut but are critical to enabling major changes that drive an organization’s long-term success.
Atlantic-IT.net, your outsourced IT department, has experience assisting small and midsize businesses with IT budgeting and planning. Let us help you develop a sound strategy that supports business goals and creates a better understanding of the value of IT across your organization.