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