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Build an IT Budget That Demonstrates Value Delivery

Get the budget you need to enable IT to deliver to its full potential.

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Contributors

  • Ken Russell, Partner, Fortium Partners
  • Andre Robillard, Head of IT & Administration, Dairy Farmers of Ontario

Your Challenge

  • IT cost pressure is fueled by negative sentiment; IT can be perceived as a high cost that does not deliver value.
  • Budgetary approval is difficult because finance executives have a limited understanding of IT and use a different vocabulary.
  • Detailed budgets must be constructed in a way that is transparent, but too much detail results in complexity that is confusing.

Our Advice

Critical Insight

An effective IT budget tells the story of how IT is going to deliver value to the business.

  • Make the business your partner to understand their future needs.
  • Know how much money you’ll need and the value you’re going to deliver.
  • Communication matters; present clearly and credibly.
  • Help the organization make the right decisions by explaining the implications of its choices.

Impact and Result

  • Knowing the initiatives business units will propose allows you to get a head start on forecasting IT costs.
  • Presell ideas. Quick face-to-face chats about how a new initiative could benefit the organization can go a long way.
  • Do not pad key innovation project budgets; building the case for approval is difficult enough as is.
  • Forecasting operating costs requires an accurate view of historical costs and an understanding of how business changes will affect IT costs.
  • Anticipate the questions that will be asked; discretionary projects are often criticized and challenged. Think about areas that people will focus on, do research, and be ready to respond intelligently.
  • An IT department can’t squeeze dollars out of rocks. Tie cost reductions to service reductions and deferred projects.

Research & Tools

Guided Implementations

This guided implementation is a three call advisory process.

Guided Implementation #1 - Plan

Call #1 - Plan the budget.

Guided Implementation #2 - Build

Call #1 - Build the budget.

Guided Implementation #3 - Sell

Call #1 - Sell the budget.

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Cost and Budget Management Course

Get the budget you need to enable IT to deliver to its full potential.
This course makes up part of the Financial Management Certificate.

Course information:

  • Title: Cost and Budget Management Course
  • Number of Course Modules: 8
  • Estimated Time to Complete: 2-3 hours
  • Featured Analysts:
  • David Yackness, Sr. Research Director, CIO Practice
  • Gord Harrison, SVP of Research and Advisory
  • Now Playing: Executive Brief

Onsite Workshop

Discuss This Workshop

Book Your Workshop

Onsite workshops offer an easy way to accelerate your project. If you are unable to do the project yourself, and a Guided Implementation isn't enough, we offer low-cost onsite delivery of our project workshops. We take you through every phase of your project and ensure that you have a roadmap in place to complete your project successfully.

Module 1: Plan

The Purpose

  • Definition of IT budgeting.
  • Recognition of the benefits of better budgeting.
  • Understanding the risks of budgeting.
  • Understanding the challenges of budgeting.
  • Preparing for IT budgeting.
  • Getting the right people in the room.
  • Understanding budget mechanics.
  • Establishing a clear budget target.

Key Benefits Achieved

  • Understand how better budgeting can help your IT department.
  • Understand the risks of poor budgeting.
  • Identify budgeting challenges.
  • Understand what business units are planning to do.
  • Successfully pre-sell ideas and get support for IT initiatives.
  • Assemble a budgeting team and make sure resources are available for consult.
  • Determine your budgeting target.
  • Understand budgeting process.

Activities

Outputs

1.1

Discuss how IT budgeting works for your organization.

  • Identified budgeting pain points experienced by your IT department.
1.2

Brainstorm budgeting goals and understand what your IT department would do with a limitless budget.

  • Identified budgeting pain points experienced by your IT department.
1.3

Identify organizational goals and discuss impacts on IT budget.

  • A list of all goals that the IT budget would meet with a limitless budget.
1.4

Prioritize meeting the goals of finance and other business units.

  • A prioritized list of key goals that the IT budget must meet.

Module 2: Build

The Purpose

  • Forecast capital costs.
  • Understand best practices for capital budgeting.
  • Forecast operating costs.
  • Understand best practices for operating budgeting.

Key Benefits Achieved

  • Accurate budgets for the capital costs of innovation, maintenance, and business projects.
  • An understanding of best practices for capital budgeting.

Activities

Outputs

2.1

Identify key projects.

  • A list of all projects that may launch this fiscal year.
2.2

Forecast capital costs.

  • Accurate capital cost forecasts that are classified into various categories.
2.3

Forecast operating costs.

  • Accurate operating cost forecasts that account for inflation, changing labor costs, changing vendor prices, and changing service levels.

Module 3: Sell

The Purpose

  • Ensure budget includes required information.
  • Validate and fix anomalies.
  • Share your budget internally.
  • Construct a budget presentation.
  • Sell your financial budget.
  • Build your budgeting people, process, and technology capabilities.

Key Benefits Achieved

  • Ensure all required information is included.
  • Identify and fix errors.
  • Adjust assumptions to yield greater accuracy.
  • Build a compelling budget presentation.
  • Build a revised budget presentation.
  • Practice the presentation to improve delivery.
  • Find additional cost savings opportunities to suggest in the event of revision.
  • Build budgeting capabilities through improving human capital, processes, and IT financial management technology.

Activities

Outputs

3.1

Play devil’s advocate: take turns critiquing the budget.

  • A completed financial budget with accurate and defensible operating and capital cost projections.
3.2

Adjust the budget to tighten assumptions and correct errors.

  • A completed financial budget with accurate and defensible operating and capital cost projections.
3.3

Build the budget presentation.

  • A completed budget slide show that is compelling and concise.
3.4

Mock presentations: practice the budget presentation.

  • A well-rehearsed and compelling budget presentation.
3.5

Identify budgeting activities your IT department needs to stop doing, continue doing, and start doing.

  • A list of budgeting activities that your IT department needs to start doing, stop doing, and continue doing.