IT MANAGED SERVICES & SOLUTIONS

IT Spending Strategies & Tech Budgeting

Tech Budgeting & Spending Strategies

Organizations around the globe struggle with IT budgeting. One of the primary reasons for the struggle is that the IT department doesn’t understand the budgeting process, and the Accounting Department doesn’t understand IT. CIOs that have reached a certain level can budget within their own departments, but may have difficulty coordinating with higher levels of executive management. With IT playing such a major role in all industries, there must be a ‘meeting of the minds’ between CIOs and executive finance teams.

Here are some trends that will affect IT budgeting and spending strategies:

  • Enhancing end-customer relations: With advancements in consumer technology, IT teams are being pressured to provide better user-friendly corporate software and hardware. To meet the demand, many CIOs have allocated more of their overall budget towards customer interface solutions.
  • Innovation and business opportunity: Many firms are reluctant to spend less on mandatory investments and maintenance, and more on innovation and business opportunity. Luckily, this is slowly changing, and CIOs are allocating more of their budget toward this endeavor.
  • Cloud investment: According to a Benchmark Survey by CEB, while more than 91% of IT organizations do allocate some of their budget toward the cloud. With the focus is on service responsiveness and flexibility, cloud investments will continue to rise.
  • IT staff growth: Organizations are too conservative when determining the flat rate for IT staff growth. Responses in the CEB Benchmark indicate that CIOs predict staffing needs will increase by more than 4% over the next 5 years.
  • CIO role will extend beyond IT: The ever-changing IT landscape has blurred the functional boundaries; CIO’s are now taking on non-IT responsibilities, such as procurement. The CEB Benchmark also pointed out that more than 60% of CIOs are responsible for at least one non-IT area.
  • IT spending outside corporate IT: This is a trend that is expected to continue and grow over the next few years. HR, Finance, Operations and Marketing allocate a large percentage of their budget to technology as business leaders take on technology projects in order to meet their objectives.

When CIOs create budgets for their IT departments, they generally consider 3 areas: Run Budget, Grow Budget and Transform Budget.

Run Budget

How much is it going to cost to run the IT processes for the organization on a day-to-day basis? Some items to consider include key software upgrades, mission-critical server replacements and personnel costs. Companies that need to trim their IT budgets should never take it out of the run budget initiatives. These cuts could introduce operational risks in the event of a network, application or server failure.

Grow Budget

These budget items help an organization introduce improve existing capabilities and introduce new ones. These could include implementation of new software, purchasing a new firewall, or an upgrade of the company’s website that improves interactions with customers.

Transform Budget

These are research and development types of activities, such as seeking the right technologies for organizational capabilities; changes to business processes; or, a new product or service.

Budgeting and spending within any organization can be a challenging task. When IT initiatives are combined with reluctant finance teams, the challenge can be even greater. CIOs and finance departments need to work together to create a strategy for the IT department to run efficiently, while aligning with the organization’s overall goals.

 

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