Budgeting for 2008

“IT budgeting can’t be that difficult, right? You just add up the cost of your computers. Simple! Oh wait, we have to factor in the cost of software. So it’s still a piece of cake. Oh yea, what about staff training? And repairs? And tech support? And consulting fees? What happens if my server crashes?? AAAHHHHH!!!!! Will this nightmare ever end?”

To tell you the truth, when I personally think of creating a budget, a trail of cold fear trickles down my spine. However the reality is simple- Budgeting is a part of your business that is vital for its survival and growth. The whole truth is this – If you have a good budget built on sound thoughts and principals then your next year of business will run much more smoothly than if you just throw some numbers on a piece of paper and call it a budget. Now on that note, creating a budget does not have to be reminiscent of going in for a root canal either. Here are a few tips from eMazzanti Technologies  that might be able to help you as you create a budget that will help, rather than harm your company.

Accurate budget projections could be achieved by working through six easy steps. First, you must establish a budget baseline. Second it’s necessary to outline the agency’s technology vision. The third step is the actual development of the budget. After these are done there are three additional steps, referred to as the “Sanity check”

First things first: establish the budget baseline for your agency. The baseline is an assessment of your current IT costs. Be mindful that your IT costs are not just the obvious “hard costs” of training, personnel, and software. You also have “soft costs” which are much harder to measure, such as the amount of time users spend wrestling with an application.

It is also important to recognize that a system costs money not just when it’s purchased, but over its lifetime of use by the agency. That figure is called the Total Cost of Ownership (TCO), it’s the amount the technology will cost over the time period your agency uses the system. If you break down this number by year – as you spend money on training or on hardware or software upgrades, for instance – you will have a detailed picture of your agency’s tech spending for each year of that system’s useful life.

Once you have established the baseline, you need to involve members of your staff in the development of the agency’s strategic technology vision. Bring in the Executive Director, members of the board, and your program staff and ask them to identify their tech problems. Their Input will allow you to budget for new initiatives while continuing your current operation. Now that you are armed with the IT vision and a profile of you r current tech costs, you can now develop an accurate budget.

Tackling the budget: There are five potential approaches, with each one having its pros and cons. Keep in mind that there is no single, perfect way to develop a budget, and your best results will likely come from picking a combination of the following methods.

Project from current expenses

• Use your baseline as a starting point and then adding inflation and the estimated cost of any new projects you are planning.
• Projections make it easy to avoid analyzing the effectiveness or value of your current tech practices.
• Drawback – by focusing strictly on the numbers you may neglect to consider the efficacy of your system.

Total Cost of Ownership

• TCO anticipates for the future by taking in ongoing maintenance and hardware upgrades into account.
• Drawback – many numbers have to be guessed at

Consider the IT Life Cycle

• This strategy can be used if your company has been budgeting for technology for some years already – this is the process a system goes through from beginning to end.
• Drawback – the cost of taking a system through it’s life cycle is difficult to estimate if there is no IT life cycle history from which to draw.

Benchmarking

• Look at agencies similar to yours and budgeting based on their experiences.
• This is a realistic approach that doesn’t involve mush guesswork but can be difficult to obtain the necessary information
• Drawback – there is a danger that you will overlook key differences when comparing another agency’s IT system and budget to yours.

Mission-driven, top-down planning – advantage of budgeting toward agency goals rather than focusing strictly on the technology

• If your agency’s tech vision has been clearly delineated, than this approach can be quite useful. This approach ensures that technology is integrated with the agency’s work.
• Drawback – it can be a very big challenge to translate agency goals into concrete technology plans.

As you are considering these five methods, be sure to include figures for new projects as well as for maintenance. Be specific because specificity will enable you to defend your budget to your agency’s leadership. Create separate line items for

• Hardware – PC’s and servers
• Software – licenses and applications
• Services – outside tech support and service contracts
• Labor – payroll for your IT staff
• Training – books and classes
• Telecommunications – data and phone lines
• Supplies – cables and paper
• Environment – rent, security

So now you have done it, you have created the perfect budget! People will be begging to copy your estimates because you have taken everything possible into account. Hang on just one minute – before you start singing We are the Champions as you walk to turn the budget in do yourself a favor and perform the three step “Sanity Check.”

• Compare your budget results against your TCO
• Compare your results against your IT life cycle plan
• If possible, compare your budget results against IT budgets of your peer agencies.

If your budget is in the same ballpark as the agencies that perform services similar to yours, then your budget is probably realistic. Pick up that microphone and start off with the chorus “We are the champions my friend, and we’ll keep on fighting till the end.”