IT Budgeting Best Practices 2021
Sweeping digital transformation is an inevitability for all business sectors in 2021. This calls for greater investment in IT, and therefore more attention must be paid to how IT budgets are set. Simply throwing more money into IT is not the solution however. Your budgets must be established and allocated with careful thought. Thankfully some practical tips will go along way to making that happen. Let’s review.
7 Practical Tips to Making Sure Your IT Budget Helps You Reach Your Digital Transformation Goals in 2021
I. Meeting of Minds Between Project Managers and Stakeholders
A recent study from University of Ottawa found that one-third of IT projects fail because of limited involvement from senior management. Responsibility for this falls on both sides of the hierarchal coin – with project managers and C-level executives alike.
Moving forward project managers must communicate with senior management (and vice versa) to clearly identify, document, and confirm project goals and requirements. This will help you establish project budgets that match the actual needs.
II. Greater Investment in the Cloud (but with a plan)
Cloud adoption is more important in 2021 than ever before. It’s the cornerstone of data security and productivity. Significant investment must be made here as the cloud is far superior to on-premesis solutions when it comes to cost efficient scalability (in either direction) for nearly all operations.
That said, migrating to the cloud without adequate training and a defined plan is what historically has resulted in failure and trepidation regarding further adoption. For this reason you should work with an IT support provider to review your security, productivity, and data storage requirements so that you help you make the right decisions regarding what your cloud investment for set-up and maintenance should look like. Consult with an experienced IT firm that is also a cloud services provider.
III. Invest in Tools Which Automate Redundant Tasks
Using costly human resources to conduct repetitive tasks is inefficient and cost prohibitive. Their time is better spent on activities that directly generate revenue. When you invest in automation at a number of corporate levels you will reduce or eliminate mundane tasks. What are these tasks? The include everything from asset management, data backup, Software as a Service (Saas) installations and updates, reporting, shipping logistics, IT security reviews, and much more. By introducing automation your company will discover new ways to increase efficiency and improve productivity. As a result you will significantly reduce overhead and free up your IT budget for additional initiatives, those that drive new business.
If you’re unsure what can and can’t be automated in your current IT environment, consultant with an IT firm.
IV. Don’t Buy Enterprise When You Don’t Have To
There’s no denying that cloud-based solutions deliver on IT security, automation, and overall productivity, but many companies think they have to go all-in on enterprise solutions. If you’ve seen the price-tag on many enterprise software tools then you know how expensive they can be. This may have been a barrier to entry in the fiscal years prior, leaving you with a negative balance on your IT spend (if purchased). The cost of purchasing, deploying, maintaining, and using appropriate enterprise systems is typically too high for most small-to-medium companies.
However, there may be room in your budget after all.
To avoid the upfront cost of securing enterprise solutions, secure a partnership with an IT firm that has already made the initial investment in enterprise subscriptions and can offer them as a part of their month-to-month IT service to you. Your company will enjoy signifcant savings while realizing the enterprise benefits.
V. Budget for “Unexpected” Events
To avoid surprises on the bottom line of your IT spend at year end you must add a buffer that accounts for unexpected events. By building-in contingencies (any incident or event that can impede a project) you will have the funds available instead of having to pull them from your coffers or another department.
Please note that these contingencies must be clearly defined, and collectively determined by stakeholders and projects managers, as per item #1 above. While the potential for incidents and events varies by scope and industry, they often involve a deviation in any of the following:
- Product and material availability and vendor pricing
- Vendor and supplier relationships
- Human resources management
- Currency exchange rates
- Interest rates
- Political shifts
- Environmental mandates
- Public health (i.e. COVID 19)
Once you’ve created a list of contingencies, calculate how an event will alter the budget. For instance, consider that “If x occurs, the timeline to project completion will extend by x amount of hours, and therefore the budget must extend by x amount of dollars”.
With a contingency plan in place you will be prepared to immediately adapt your budget accordingly and manage expectations of senior management and other stakeholders (especially financiers).
VI. Establish Key Performance Indicators (KPIs)
Key Performance Indicators (KPIs) provide a point of reference that can be evaluated as each IT project moves forward and concludes. Like with goals, KPIs must be set in a collaborative manner between senior management, the project management team, and IT personnel. The KPIs must integrated into the roadmap of each project so that both successes and concerns can be quickly identified, with adaptive adjustments made accordingly.
Within the realm of IT infrastructure, KPIs often include Planned Value (PV), Actual Cost (AC), Earned Value (EV), Cost Variance (CV), Cost Performance Index (CPI), Schedule Variance (SV), and ultimately Return on Investment (ROI). Of course, these will vary by industry but you know which calculations are most important to your organization.
VII. Get IT Budgeting Support from a Managed Services Provider (MSP)
Most companies look to IT firms to provide support with tech services such as hardware and software installation, cybersecurity maintenance, and data backup / disaster recovery. But did you know that a Managed Services Provider (MSP) is also an expert in IT budgeting?
With vast experience in a variety of industries an MSP is the most qualified form of support you can get in setting your IT spend for the year ahead. An MSP will look to your past IT budgets, identifying unnecessary outflow and gaps. An MSP will look at existing shortcomings with respect to current business applications and technologies and make recommendations with respect to which hardware and software tools are best suited to your infrastructure and goals. By investing in IT support prior to setting your IT budget you may actually save more than you would allocate when going at it alone. At the very least, you will use technology more efficiently than ever before, which will indeed improve your bottom line at the end of the 2021 fiscal year.
Contact SAV Technology to get help with your IT budget and service needs.