There’s more to IT budgeting than simply cutting costs and maintaining spending within set targets. This means – for IT managers who aren’t comfortable around numbers, at least – the process can sometimes be a frustrating experience.
And with budgeting increasingly becoming a strategic part of many businesses’ operations, knowing how to probably set an IT budget that’s going to help you, your team and the company succeed is key.
Whether you’re building a budget for the first time or are looking to add a few new things to your current costing repertoire, use this in-depth guide to get things started.
What is IT budgeting?
At its core, IT budgeting is the allocation of money that a company gives to its various IT teams and programs. An IT budget will list funding for all projects and technologies within the necessary departments, whether it’s one-time expenses for specific projects and initiatives or recurrent expenses like staffing.
IT leaders tend to be responsible for presenting and overseeing the budget, although line managers and consultants often pitch in too. In creating an IT budget, there’s often an expectation that the final figure will be reduced or even rejected outright. However, instead of simply trying to secure the most money, it’s a better idea to think more strategically about your approach.
Say, for instance, you’ve been pursuing a strategy to migrate your IT infrastructure to the cloud. Following such a strategy has resulted in some operational savings, which puts you in a better position to use those savings as a way of justifying an increase in project expenses in other areas.
By communicating your strategy (whatever that may be) and sharing it amongst the company, it turns IT budgeting into a process of tweaking existing amounts, as opposed to having to justify large amounts for new spending.
Why is IT budgeting important?
An IT budget provides leaders with a foundation that, in effect, guides the IT department’s activities through the year. Without a budget, you’re far more likely to make spending requests on the fly – creating unnecessary overheads in the process.
By making the department’s spending more transparent, an IT budget creates a more comprehensive view of IT funding requirements. For instance, are you overspending in certain areas? And how do your spending activities compare to similar departments?
By unearthing discrepancies and anomalies in your IT budget, you can start investigating the areas you need to improve. And when you’ve identified such areas, correcting these pain points will start to form the basis of more strategic IT decisions.
Best practices for IT budgeting
Use the existing budget as a baseline
Casting a critical eye over your current budget will give you an idea of what you’re working with and what you could potentially be working with next year. Drilling down into specifics will help here, so be prepared to run a fine-tooth comb through things. What worked? What didn’t? What should never have been part of the budget in the first place?
By understanding how it was put together, you can look at things from a fresh perspective, and put aside previous approaches that may have been holding you back.
Consult with your team
Your team will always be looking for ways to improve the way they carry out their duties, so make sure you set aside time to talk with them. Whether it’s one-to-ones, stand-up meetings, or formal discussions, use this time to understand what their priorities are and what they feel needs changing.
Once you’ve heard them out, identify what you can do to fit their wishes into the company’s overall mission.
Don’t be afraid to ask for help
Whether it’s your first time or your thirteenth, there’s nothing wrong with asking for help when putting an IT budget together. Look to others in your organisation who you can call on to offer a hand with things.
If your finance team has budget analysts, then be sure to pick their brains about budgeting. Whether it’s standard budget questions, more advanced areas like depreciation, or just tips on budget approval, they should be able to provide you with plenty of insights and information.
If such resources aren’t available to you, then you can always look at budgeting classes offered by local higher education institutions instead. Although you might not be able to tackle issues that are specific to your company, they can certainly help you form a better understanding of the process.
Prioritise your requests
There’s a strong chance you won’t receive everything you ask for. Or maybe corporate earnings aren’t as high as usual, and you have to scale things back.
If this is the case, then what items can you cut? By knowing which items are high priority and which aren’t, you’ll know what you need to do should the budget not fall in your favour.
Tips for managing costs
Once you have a budget in place, there are all sorts of ways you can keep costs low. Give the following approaches a go if you’re looking to make your money go further.
Consolidate databases and apps
As much as it’s feasible, consolidating your databases can keep costs down. By storing databases in one place, you can reduce the resources needed to support a series of platforms and scale back your infrastructure as a result.
Remove legacy systems
If you’re still using old, outdated platforms, you’ll likely have to fork out to have them fixed. Instead of waiting for them to give up the ghost, get rid of these legacy systems in favour of new platforms; it’s far less costly and time-consuming to have them repaired.
Look for part-time manpower
Say you’re in need of a new hire but there’s not enough money in your budget for a full salary; are there any other teams across the business that would also benefit from this part-time hire’s skills too? When the workload for a person is shared across teams, you can then split the cost for that employee.
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