IT budget planning remains one of the biggest challenges that any CIO faces. Although getting the budget plans approved is a difficult task, the exercise, however, brings predictability to a company’s IT spending. Additionally, IT budget planning also helps in ensuring resource optimization. Here are six tips that would simplify your IT budget planning process and help you achieve high returns on your IT investments.
1) Plan with a long-term perspective
A good IT budget planning exercise, essentially, starts with charting the business road map well in advance. Once chalked out, the IT budget plan should leave least room for surprises. At no point your IT infrastructure should be unable to support the future business needs. The IT budget planning, therefore, must be aligned with the business projections.
Ideally, take a long-term view of your IT infrastructure planning and costing. Although the initial investment on hardware, software, and storage may be high, investing from a long-term perspective will ensure the smooth running of applications even as your business scales up. However, shortsightedness in IT budget planning may result in over-spending on IT components and maintenance later.
2) Plan every cost component in detail
Have an eye for detail in IT budget planning, just like an eagle is able to spot the tinniest of prey despite soaring at high altitudes. Make a staggered outflow plan for each cost component for the next three years. In fact, plan the budget judiciously factoring in the probable augmented cost of each IT infrastructure component and manpower in the first year, second year, and third year.
For instance, while making a budget plan for IT security, you may need to balance scalability on one hand and overutilization on the other. Both – underutilization or overutilization – may have their adverse impact on the profitability.
3) Earn deep discounts with a deeper vendor engagement
Generally, IT budget planning also involves vendor management and procurement planning. Remember, a long-term investment assurance to your vendor may help you with deeper discounts. In case of telecommunications equipment, many products reach end-of-life within three years, following which they need to be replaced. If you agree to buy from the same vendor, you can control a better bargaining power as even the vendor is forced to think long term. My experience has been that in such cases, you can buy the equipment even for 15% of its rack price after three years if the agreement is done at the IT budget planning stage.
4) Plan and push for support-extensions at fixed-costs
If your IT budget plan is aligned with vendor management, you can observe a similar pattern with respect to infrastructure support. A long-term relationship with your infrastructure vendor can assure you an extended support at negligible cost. However, if done properly, long-term agreements with vendors can also protect you from inflation as the support costs, which rise with time, can be fixed today.
5) Explore shared services alternative
IT budget planning can be successful if you are prudent at the time of utilizing funds. With the cloud market maturing, most cloud vendors today have invested in the best in class systems and tools. This ensures that even their shared-services options have started looking reliable. A shared services arrangement can result in considerable savings vis-à-vis a dedicated services arrangement. I know of a telecommunications company where the CIO pocketed a cool, 50% discount simply by choosing a shared services model for CRM cloud to be used by 400-plus people in his organization.
6) Build business case
A key to efficient IT budgeting is building a business case for every investment you plan. IT budget planning is customarily boosted by the promise of attractive return on investment (RoI). The planned IT investments should win a CFO’s approval only if the business case is alive to the company’s current as well as future business needs. There can be two approaches: positive and negative – and both are effective. Let me share an example of positive approach: the email system of a multi-national company in the BFSI sector was saddled with issues and needed to be scaled up. The CIO’s team, instead of simply buying additional licenses, went for a unified communication (UC) suite. The CIO could prove to the board that a UC would help improve the collaboration between the people working in multiple countries and time zones, thus helping the business run 24/7. A negative approach is handy while planning budgets for IT security and compliance.
About the author : Kamal Sharma is the Group CIO at Mindlance, a global technology and business consulting company. He has experience in executive IT strategy and engineering, business management, operational streamlining, business development, strategic planning and business process management. He has previously worked with IBM, Polaris and Satyam on various management and IT delivery positions.
(As told to Joyoti Mahanta)
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This was first published in July 2011