A “perfect” budget for IT may not exist. But an improved IT budgeting process is certainly possible.
Usually, the standard IT budgeting routine applied by most businesses often becomes ensnared in prolonged negotiations and neglects critical considerations related to strategy, value creation, and resource allocation. On the other hand, if you manage to re- imagine your budgeting framework and align it with strategic outcomes, you can empower your teams to leverage your technology stack to its fullest potential.
When done right, IT budgeting contributes to a more resilient and adaptable IT infrastructure, promoting cost-conscious decision-making across the board.
Let’s dive into some proven tips for IT budgeting and how you can maximize the value of your technology program:
Align Business Strategy and IT
Similar to a project plan or IT roadmap, the budget offers guidance and a holistic overview of your department along with its funding needs. It allows you to quickly assess whether resources are disproportionately allocated to specific areas. And, in the context of department-level IT budgets, it delivers a comparison of your expenditures with those of similar departments.
The best way to ensure that your teams receive sufficient funding for their budget requests – while receiving recognition for the value they contribute to the organization – is by maintaining proper business/IT alignment. This process begins with identifying technology projects and investments that align with and advance the business goals of your organization. Subsequently, you must see to it that investments are mapped to your strategic plan, establishing a cohesive link between the budget and the broader organizational objectives.
Review Past Budgets & Begin Early
Initiate the budget development process immediately after approval of the previous year’s budget, using it as a springboard. This means regularly monitoring spending against the previous year’s budget, leveraging variances and insights for ongoing adjustments to a draft budget.
It’s also prudent to assess the previous year’s budget and current expenses to identify areas for reduction or reallocation, even several months before the budget deadline. Launch activities to trim excess “fat” in advance, making it easier to justify an optimized budget without unnecessary items.
Many businesses overlook the importance of involving their IT team early in the planning and decision-making process. By engaging them well in advance, not only is there a guarantee of a better understanding of technical constraints, but it also empowers them to budget their resources properly and make design decisions from an integrated perspective.
Your network comprises various devices, ranging from desktops and mobile devices to components like firewalls, servers, client applications, routers, switches, access points, and more. A solid network administration strategy involves implementing established processes to oversee the network and maintain an up-to-date record of all devices. In addition to managing the data flow in and out of different host environments such as on-premises servers, private clouds, and public cloud platforms, it helps you evaluate the performance of each device and effectively manage its lifecycle. Neglecting to patch or properly maintain outdated devices can pose a security risk.
As the majority of enterprise processes go online, prioritizing network security becomes essential for fostering resilience, effective risk management, and overall success.
If the demand on your network exceeds the capabilities of internal IT resources — resulting in frequent downtime and heightened security risks — you can engage a managed service provider (MSP) who can remotely handle network orchestration and offer on-site support. This includes a comprehensive range of tasks, including network design and implementation, routine maintenance, security checks, and configuration adjustments.
Audit Your Current Infrastructure
To establish a flexible IT budget, you need to audit your existing IT infrastructure and take stock of your company’s hardware and software resources. This inventory should include essential details such as patch dates, locations, warranties, licenses, charges, and vendor information.
By conducting a rigorous audit of your infrastructure, you are able to gain valuable insights into when to allocate funds for updates, replacements, and upgrades. For example, recognizing that computers typically have a lifespan of about five years, coupled with warranties from the manufacturer, allows you to strategically plan when a hardware update becomes necessary. Inadequate budgeting for such scenarios significantly heightens the risk of downtime and productivity losses.
In addition to considering the lifespan of hardware, it is a good idea to evaluate the software landscape for updates, licenses, and potential compatibility issues. Incorporating these factors into your budgeting process makes for a more comprehensive strategy that accounts for your entire IT ecosystem.
Factor in Room for Emergencies and Growth Scenarios
No IT budget is complete without provisions for emergency expenses and growth opportunities. Allocating funds for these purposes indicates that your business can promptly respond to emerging opportunities, such as adopting new technologies, or mitigate the impact of significant disruptive events like a data breach or service interruption.
Anticipating and setting aside funds in advance enhances your organization’s agility, enabling swift responses when needed. It’s an error we see time and again across businesses of all sizes – they plan their resource budgets at 100%, assuming no new
priorities will emerge throughout the targeted year. However, allocating resources at 80% capacity allows for greater flexibility and adaptability.
In fact, leaving room for even a 10% margin serves as a buffer against unforeseen changes – contributing to a more adaptive approach to resource planning.
Invest in Training and Skill Development
Regrettably, too many businesses tend to overlook allocating resources for the training and skill development of their personnel. This negligence not only influences how your teams use your technological assets but also lays bare the vulnerability to potential data breaches and security incidents.
Therefore, we recommend designating a segment in your budget expressly earmarked for ongoing training initiatives. Such investments pay dividends in the form of a resilient and adaptive IT team, capable of not only responding to current challenges but also proactively shaping the organization’s technological trajectory.
Leverage The Cloud
An enormous part of your organization’s IT expenses is likely dedicated to software.
That’s why it’s paramount for your IT leaders to assess if the deployed software is being used optimally, given the continuous improvements in plans from cloud service providers that promise enhanced features and faster performance. Moving to those helps in cost savings, as those providers often operate on a pay-as-you-go model, enabling organizations to pay only for the computing resources they consume. This aligns with actual usage, eliminating the need for hefty upfront investments.
Cloud-based software solutions also often operate on subscription-based licensing models that encourage customers to more effectively manage software expenses, with the flexibility to scale software usage as needed. By actively monitoring and optimizing cloud resources, you can pinpoint cost-saving opportunities and refine your budget allocations.
IT BUDGETING WITH YARDSTICK TECHNOLOGIES
Maneuvering through an IT budget is no easy feat, but with a bit of research, project management, and understanding of your organizational structure, you can get started with some tangible, economical solutions that can future-proof your IT program.
At Yardstick, we don’t approach IT budgeting solely as an administrative process – we see it as a validation and support tool for your IT strategy. If you haven’t set up a formal or informal IT strategy, the budgeting process is as good a place as any to begin exploring improvement areas — setting the stage for more strategic IT management and digital transformation projects.
If you need help managing your IT budget or finding the best solutions to help you increase organizational agility while meeting other key business objectives, contact us today for a free consultation.
