Build An IT Budget: Effective IT Budgets Are More Than A Spreadsheet. They Tell A Story

V4
Build an IT Budget
Effective IT budgets are more than a spreadsheet. They tell a story.
Info-Tech Research Group, Inc. is a global leader in providing IT research and advice.
Info-Tech’s products and services combine actionable insight and relevant advice with
ready-to-use tools and templates that cover the full spectrum of IT concerns.
© 1997-2017 Info-Tech Research Group Inc. Info-Tech Research Group 1
ANALYST PERSPECTIVE
Value = Benefit – Cost
For any organizational function that is structured in a hub-and-spoke
fashion (a central unit delivering services to other units) without a
direct connection to revenue, presenting the value of investments will
always be a challenge.
Cost information alone is not enough context for a business audience

to understand the value of IT investment. The challenge becomes
about how exactly IT should communicate the benefit of investment to
fulfill the value equation.
The best recourse is to align investments with confirmed

organizational priorities, goals, imperatives, and essential outcomes.
Your IT budget and presentation must include this.
David Glazer
Research Manager, CIO Practice
Info-Tech Research Group
Info-Tech Research Group 2

Executive summary
Situation
• Budgetary approval can make or break your year. IT is often viewed as
a cost center and getting enough funding can be challenging. A bad
Your audience won’t understand
budget proposal can be subjected to fiscal attack preventing you from
meeting the needs of the business. A good budget proposal can get you the value of IT if you can’t
the funding you need to deliver extraordinary value. communicate the benefit(s).
Complication • An IT budgeting process must contain

adequate measures to capture and
• IT cost pressure is fueled by negative sentiment; IT can be perceived as communicate the benefit of IT
a high cost that does not deliver value. Budgetary approval is difficult investments.
because finance executives have a limited understanding of IT and use
a different vocabulary. Detailed budgets must be constructed in a way
• This begins with the collection of data
that is transparent, but too much detail results in complexity that is and ends with effectively presenting the
confusing. benefits IT investments will have for the
• As traditional IT capital expenditures have been replaced by cloud business.
services and other “as-a-service” models, the line between capital and
operational budgets has blurred. A lack of clear definitions confuses
finance and undermines IT’s budgetary goals.
Resolution
• Our approach speeds up the process of information gathering with customizable forms, templates, and best practices.
• Our program focuses on working collaboratively with the business in order to identify, categorize, and prioritize costs. Help
the business achieve its strategy by communicating the value of IT investments and accurately forecasting costs and
benefits.

Our understanding of the problem
This Research Is
is Designed For: This Research Will Help You:
 Chief Information Officer (CIO)  Determine how better budgeting can help your
IT department and organization.
 Clarify budgeting goals and objectives.
 Develop an accurate forecasting methodology.
 Develop a better approach to collecting and
communicating the benefits of IT investments.
 Improve chances of getting the funding you
need through enhanced presentation and
negotiation.
This Research Will Also

Assist:
Assist: This Research Will Help You:
Them:
 CIO Direct Reports Clarify budgeting goals and objectives.
Develop a forecasting methodology for their
specific silos.
Help strengthen the budget via peer review
and collaboration.
Develop budgeting skills that will improve your
IT department’s IT financial management
capabilities.

It’s not just you; everyone feels the pain of IT budgeting
40% of CFOs describe their current financial planning

and analysis system as effective.
37% of CFOs said their organizations’ budgeting

processes needed improvement.
of CFOs claim their staff was too busy with daily

62% tasks to make the changes needed to keep their
budgets up to date.
Source: Grant Thornton, 2015

IT’s success depends on delivering benefits
Historically, IT
departments have
been mandated to
“Which business 2 optimize
objectives should
IT be able to 5 4 resources and
support best?” % 5 mitigate risks.
Resource Optimization %
Today, IT success
Benefits Delivery means delivering
benefits by
generating
3 revenue and
0 creating value for
%
Risk Mitigation stakeholders.
Source: Info-Tech Research Group

Many CIOs misestimate the size of their next IT budget
CIO Expectation CEO Expectation

43% of CIOs
overestimate the
Increase size of their next
> 30%
budget.
Increase
16 –30%
Increase
16 –30% 23% of CIOs are too
conservative and
underestimate their
future IT budget.
Increase Increase
6 –15% 6 –15%
Increase
1 –5% CIOs
Increase
Overestimated
1 –5%
Decrease CIOs Accurately
1 –5% Decrease Estimated
1 –5%
Decrease CIOs
6 –15% Underestimated
Source: Info-Tech Research Group

Organizational priorities should drive IT priorities; there’s
misalignment on shareholder value
Based on responses from 63 CEOs, CEOs and CIOs agree that significant
their most important goals are… improvements are required for…
1st Maximizing stakeholder value

(CIO: 4th).
●
Metrics measuring success of IT
projects.
2nd Improving operational efficiency

(CIO: 1st).
● Business stakeholder satisfaction.
3 rd Improving customer experience

(CIO: 3rd). ●
An IT strategy clearly defined,
published, and aligned with business
goals.

Common challenges with budgeting
Symptom Cause
The funding I get just isn’t enough to deliver The projects led by business units demand IT support,
everything that business units demand while consuming a large proportion of the IT budget. Limited
maintaining service levels. Important IT funding is provided for IT improvement. Downward
improvement projects get put on the back budgetary pressure results in service-level
burner because funds aren’t available. reduction, layoffs, and outsourcing.
There is often inadequate time given to the budget

The great irony is that the budgeting process creation process. Often, the business unit planning
itself is expensive! It takes a lot of people and a necessary to forecast IT costs does not conclude until
lot of time to get it done, and then the back- shortly before the IT budget is due. Furthermore, IT
and-forth rework is endless. budgets are rarely approved on the first submission,
leading to more work and budget reductions.
Defending my budget is impossible because IT Forecasting cost is complicated and there are a number
cost forecasting is complicated by thousands of of factors that cause inaccuracy. Data provided by
variables. If you drill down on any number finance frequently includes obsolete and unnecessary
line items, leading to over-budgeting. Furthermore, the
deep enough, you’ll find assumptions that are
deferral of planned business projects causes budget
tough to defend. And we just don’t have the and cost variance, decreasing the credibility of the IT
data to make the budget accurate. budget process.

Do’s and don’ts of budgeting
Do’s Don’ts
• Have preliminary talks with business units • Wait for business planning to conclude
to understand their plans for the fiscal year. before budgeting, resulting in a time
• Presell ideas, making business units into crunch.
advocates for the budget. • Present budget for the first time at budget
• Start budgeting early, with a sound meeting.
forecasting methodology. • Use fast and simple incremental budgeting
• Prioritize discretionary projects. that does not account for changing wages
or vendor prices.
• Reduce budget through improved
efficiency, application rationalization, and • Maintain all non-discretionary expenses
outsourcing. and cut most innovation projects.
• Present budget proposal using a visual and • Present budget proposal using the bare
engaging presentation that shows value for facts and technical jargon.
money.

Effective budgeting can provide these benefits
IT Department Enablement IT Financial Management
1 Budgetary approval can make or

break your year. A good budget
proposal can get you the funding you
2 Doing IT budgeting right this year
will make IT budgeting next year
easier and more accurate. A sound
need to meet business needs. A bad forecasting methodology is a lasting
budget proposal can result in asset that will aid future IT financial
downward cost pressure that planning.
decreases service levels.
Operational and Project Planning Faster Budget Approval
3 A solid budget proposal is a

planning tool that will help govern IT
operations. A good IT budget outlines
4 The budget process itself is
draining, difficult, and strenuous,
especially when the budget needs to
your IT department’s future costs, be reworked multiple times.
which are directly traceable to what Submitting a good budget and
your people will actually be doing. The presenting it with a compelling
budget can be used to guide projects presentation improves the chances of
and operations, track cost-budget approval the first time, saving time and
variance, and make ad hoc energy.
adjustments to spending.

Dell makes room for innovation
Industry Electronics
CASE STUDY Source ComputerWeekly
Situation
• In 2009, Dell’s $1.2 billion dollar IT budget was primarily spent on “keeping
Info-Tech’s Approach to Building an IT Budget
the lights on.”
• Legacy systems did not scale. Plan the Budget
• A non-standardized data center complicated virtualization and capacity
management. Obtain last year’s financial budget and the financial
• There were 10,000 supported applications. standards that must be adhered to this year. Eliminate
• Inefficiencies were driving the need for another data center with a $250 outdated and redundant line items.
million price tag.
• CIO Robin Johnson knew short-term funding would be needed to launch Build the Budget
cost reduction projects.
Plan your spending on capital assets. These project-driven
Action expenses will be primarily derived from new assets and asset
• Got budgetary approval for a number of projects that were designed to replacement initiatives.
drastically reduce IT costs and increase proportion of spend available for Plan your spending on running the IT department. These
innovation. expenses will be primarily derived from changing service
• Standardized the data center on x86 servers. costs, inflation, and labor changes.
• Ended capacity planning practice of adding 25% at every level.
• Improved automated server provisioning and virtualization.
• Launched an application rationalization initiative.
Sell the Budget
Combine your capital and operating costs to achieve a single
Result
view of IT spending. Ensure forecasts are reasonable and
• Drastic reduction in maintenance costs: more than $150 million in savings. the budget includes all required information.
• The automated server provisioning and virtualization contributed $38 million
Present your plan to stakeholders and demonstrate how
to cost savings.
spending can help enable strategic objectives. Negotiate for
• Reduced applications from 10,000 to 2,800 in 14 months.
approval of key projects.
• New budget proposal allows for $600 million in innovation and strategic
spending, an increase of more than 30%.

Push through the challenges of budgeting
1. IT cost pressure fueled by negative sentiment

• People feel that IT costs are too high and that IT has not delivered value. This pressure undermines IT’s
ability to get the funding needed for value delivery, creating a negative feedback loop. This blueprint will provide
guidelines around when and how to communicate IT value.
2. Communication gap
• Budgetary approval is difficult because finance executives have a limited understanding of IT and use a different
vocabulary. This blueprint will provide guidelines around how to present the IT budget in a compelling way that
finance understands.
3. Balancing transparency and complexity

• Traditional budget categories on the general ledger are not structured to support cost of service tracking or total
cost of ownership. Therefore, budgets must be constructed at the invoice level to be transparent, but this
results in complexity that is confusing. This blueprint will provide guidelines around managing the complexity
of cost allocations.
4. Hidden cost drivers of IT

• Finance executives and business units do not understand the hidden cost drivers of IT. For example, data
is rarely deleted and grows perpetually. Even if the company does not grow, IT resource requirements will
continue to grow. This type of continuous consumption growth does not often occur in other areas of the business
and can be misunderstood. This blueprint will provide guidelines around how to communicate that costs are non-
discretionary and to be expected.

This project will make it easier for you to…
1. Get budgetary approval

• Increase the chances that the IT budget you need will be approved, providing the funds needed to maintain
service-level agreements and ensure IT improvement.
2. Forecast operational costs

• Improve the accuracy and defensibility of operating cost forecasts. These forecasts can be used not only for the
IT budget proposal, but also for planning.
3. Forecast capital costs

• Improve the accuracy and defensibility of capital cost forecasts. These forecasts can be used not only for the IT
budget proposal, but also for managing projects.
4. Complete a financial budget

• Ensure IT’s financial budget is prepared in a way that is clear, concise, defensible, and compelling.
5. Give a compelling budget presentation

• Make sure IT’s budget presentation makes finance executives and business units confident in forecasts and
understand the need for discretionary spending.

Use these icons to help direct you as you navigate this
research
Use these icons to help guide you through each step of the blueprint and direct you to content related to
the recommended activities.
This icon denotes a slide where a supporting Info-Tech tool or template will help you perform
the activity or step associated with the slide. Refer to the supporting tool or template to get
the best results and proceed to the next step of the project.
This icon denotes a slide with an associated activity. The activity can be performed either as
part of your project or with the support of Info-Tech team members, who will come onsite to
facilitate a workshop for your organization.

Info-Tech offers various levels of support to best suit your
needs
Guided
DIY Toolkit Implementation Workshop Consulting
“Our team has already “Our team knows that “We need to hit the “Our team does not
made this critical we need to fix a ground running and have the time or the
project a priority, and process, but we need get this project kicked knowledge to take this
we have the time and assistance to off immediately. Our project on. We need
capability, but some determine where to team has the ability to assistance through the
guidance along the focus. Some check-ins take this over once we entirety of this project.”
way would be helpful.” along the way would get a framework and
help keep us on track.” strategy in place.”
Diagnostics and consistent frameworks used throughout all four options

Build an IT Budget – project overview
1. Plan 2. Build 3. Sell

1.1 Project Launch 2.1 Forecast Capital Costs 3.1 Aggregate and Validate Budget
1.2 Collect and Organize Data 2.2 Forecast Operational Costs 3.2 Sell the Budget
Best-Practice
Toolkit
Plan the Budget Build the Budget Sell the Budget
Guided
Implementations
Module 1: Module 2: Module 3:
Plan Build Sell
Onsite
Workshop

Workshop overview
Contact your account representative or email Workshops@InfoTech.com for more information.
Workshop Day 1 Workshop Day 2 Workshop Day 3 Workshop Day 4

Launch Data Collection Cost Forecasting Selling the Budget
1.1 Budgeting Project and 2.1 Conducting Budgeting 3.1 Forecasting OPEX 4.1 Building the Budget
Workshop Overview Interviews 3.2 Forecasting CAPEX Presentation
1.2 Identifying Relevant 2.2 Collating Cost Data 3.3 Validating the IT 4.2 Practicing the Budget
Stakeholders 2.3 Alignment With Budget With Key Presentation &
Activities
1.3 Setting Targets and Corporate Goals Stakeholders Objection Handling

Goals for Budgeting Discussion 4.3 Formalizing the
Project 2.4 Validating Budget Line Budgeting Process
1.4 Assembling the Items
Budget Team
• KPIs selected and • IT Budgeting Interview • IT Cost Forecast • IT Budget Presentation

goals for budgeting Guide
identified
Deliverables

PHASE 1
Plan
Build an IT Budget
Phase 1 outline
Call 1-888-670-8889 or email GuidedImplementations@InfoTech.com for more information.
Complete these steps on your own, or call us to complete a guided implementation. A guided implementation is a series of
2-3 advisory calls that help you execute each phase of a project. They are included in most advisory memberships.
Guided Implementation 1: Plan

Proposed Time to Completion (in weeks): 1
Start with an analyst kick-off call:

• Plan the budget
Then complete these activities…

• Project launch
• Collect and organize data
With these tools & templates:

IT Budget Interview Guide

Step (1.1): Project Launch
PHASE 1 PHASE 2 PHASE 3
1.1 1.2 2.1 2.2 3.1 3.2

Project Collect and Forecast Capital Forecast Operational Aggregate and Sell Your Budget
Launch Organize Data Costs Costs Validate Budget
Outcomes of this step
• Presell ideas; get support for IT initiatives.

• Assemble a budgeting team and make sure resources are available for consult.
• Determine your budgeting target.
Presell ideas. Have quick face-to-face chats about how a new initiative could benefit the
organization and generate buy-in.

Prepare for IT budgeting: promote IT value throughout the
year by communicating IT successes
The perception that IT does not deliver value is common. When IT works well, nobody
notices. When IT doesn’t work well, problems are often highly visible and can result in
significant criticism.
What this means for IT budgeting:

• A perception that IT does not deliver value will foster criticism of your budget and result in less funding.
• You need to fight misperceptions throughout the year by:
The new ESB will integrate key

1 Communicating IT initiatives at launch
• Describe what you will be doing and how it will
applications and data across the
globe.
benefit the business in simple terms:
The ESB project was completed on time
and on budget. Sales, marketing, and
2 Communicating IT successes
• Describe what was achieved and how it
manufacturing have eliminated
manual processes and now all share
the same, accurate data, resulting in
benefits the business in simple terms: $20M in annual efficiency gains.
• Use email effectively: Keep everyone informed of the extraordinary value IT is adding to your organization, but be
selective in your communications – don’t become the corporate spammer.

Make business unit leaders your advocates
Help business units recognize the value an IT initiative will provide them.
Mastering the dialogue
• Remember that business unit leaders speak in business terms, not technical terms: avoid IT acronyms and other
forms of technical jargon.
• A collaborative approach generally results in a higher commitment level than a selling approach. Present ideas and ask
business units how the idea will affect them.
We’re thinking of investing in technology that

Yes, we currently pay two employees to post on
marketing could use to automate posting content
Facebook and Twitter, so if it could make that more
to social media. Is that something that would be
efficient, then there would be cost savings there.
beneficial to you? – CMO
– CIO
The benefits of advocates

• Advocates will support your requests for funding, increasing the chance that finance will approve.
• Advocates may agree to fund part or all of an initiative using their budget, freeing IT’s budget to deliver value within
its budget allocation.
When advocates agree to fund an initiative, IT can lose control. Make sure you set specific
expectations about what IT will help with on an ongoing basis.

Socialize your budget early
Nobody likes surprises. Presell your budget ideas early to prevent others from suffering
“sticker shock.”
Preselling best practices:

• Preselling your ideas occurs continuously throughout the year.
• Be an open book; IT can too often be a black box of hidden projects until a formal request for funding is made.
• It is better to approach business units to discuss the costs and benefits of initiatives prior to requesting funds.
• Preparing for budgeting is an exercise in stakeholder management. See Info-Tech’s Manage Stakeholder Relations
blueprint to learn more about managing stakeholders effectively.
Preselling to business unit benefits: Preselling to finance benefits:

• Attains buy-in for initiatives, creating advocates that will • Attains buy-in for initiatives, improving chances of
support IT’s request for funding. approval.
• Allows business units to make plans around the new • Sets expectations that a request for additional funding will
capabilities, increasing the likelihood of approval. occur.
• Provides business units an opportunity to highlight • Allows finance to plan for or set aside the needed funds.
additional project benefits that IT has missed.
Preselling ideas is best done through informal mechanisms. Quick face-to-face talks about how a
new initiative could benefit the organization can go a long way in generating support.

Before you begin, assemble your budgeting team
Role Skillset Responsibilities
• Chief Information Officer (CIO) • Understanding of business The CIO will be responsible for
strategy. decision making. They will
• Understanding of IT strategy. participate in cost forecasting. The
• Strong relationship with key CIO should be the team lead:
business partners. responsible for guiding and
• Knowledge of IT operations. approving the budgets of IT staff
• Budgeting experience. and acting as a liaison between
finance, business units, and IT.
• IT Finance Lead • Financial acumen. The IT finance team will help build
• Budgeting experience. the cost forecasting methodologies
• Understanding of IT costs and for both operating and capital
service-based costing. costs. Additionally, they will help
• Cost forecasting experience. manage IT cash flows. Lastly, they
will assist in identifying cost
reduction opportunities.
• CIO Direct Reports • Knowledge of service outputs. Direct reports will assist in
• Understanding of cost drivers for budgeting for their specific silos.
their service. They will be active members of the
budgeting team who assist with
budget presentations. They will
function as an extra pair of eyes to
review the budget prior to
submission.

Make sure the following people are available for consultation
Role Skillset Responsibilities
• Business Unit Heads • Understanding of their business Communicate strategic initiatives

units’ operations. that will be launched this fiscal
• Access to planned project cost year and outline the IT
forecasts. requirements to support them.
• Understanding of where IT is Provide project cost forecasts or
required to enable business connect budget team with a
strategy. contact that can provide cost
forecasts. Be available for further
consult as needed.
• Finance Executives • Understanding of corporate Communicate high-level budgeting
strategy and how it translates to goals, such as net growth or
financial strategy. reduction. Communicate other
• Understanding of accounting budgeting goals, such as cash flow
and financial standards within requirements, expenditure
the organization. allowances, and other
considerations. Provide financial
standards the budget should
follow.
• Project Managers • Project budgeting. Project managers will assist in
• Understanding of project IT capital and operational forecasting.
costs. They will review project budgets to
ensure accuracy. They will also
assist in forecasting the operating
effects of capital projects.

Assemble the budget team and reach out to key stakeholders
1.1.1 1 hour
INSTRUCTIONS
INPUT
1. Review this blueprint (namely, the previous two slides) and make a • List of potential
list of the potential budget team. budget team
members and
2. Enlist the participation of key members of the team. In particular, stakeholders
secure the participation of:
OUTPUT
◦ IT Finance Lead
• Budget team
◦ CIO Direct Reports selections and key
stakeholders
3. With the team assembled, select key stakeholders (business unit engaged
heads, project managers, finance executives) and schedule meetings
with them to discuss the budgeting project. Materials
• N/A
Participants
• CIO

Be your departmental CFO
• Understand the CIO’s role in IT budgeting. You will have to direct your team and allocate resources amongst IT silos.
Responsibilities of a Chief Information Officer (CIO)
The CIO will be responsible for budgeting decision making. The CIO will participate in cost forecasting. The CIO should
be the team lead: responsible for guiding and approving the budgets of IT staff and acting as a liaison between
finance, business units, and IT.
Question Assist in Cost

Provide Direction Set Targets Pick Projects
Assumptions Reduction
• You may not be • You need to • Challenge the • There is only so • Minimize
forecasting make sure your assumptions much dictating where
costs directly. reports know used to forecast discretionary to cut costs, but
Instead, you will what their goals costs: make sure funding. Your help your staff
be telling your are, e.g. “we need the silo budgets reports will identify
reports to forecast to keep are accurate; you compete for that opportunities.
for their silos. For application costs will be ultimately funding and you Try not to force
example, the head down, so an accountable for will need to cuts on your
of apps must increase of no the budget. determine which reports, but
forecast more than 3% is projects are provide ideas and
application costs. acceptable.” winners. guidance.

Intro to budgeting
Budget
• Budget: An estimate of expenses to be incurred in a future time period. The outflows of funds reflect an
operational plan for achieving organizational objectives.
• There are two major types of expenses: capital costs and operating costs.
1
Capital Cost
• Capital Cost: Expenses incurred in order to buy things. This type of spending is related to the
acquisition of assets. In an IT environment, capital costs include:
o Purchasing a server.
o An integration consulting fee incurred to set up a new system.
o Etc.
2
Operating Cost
• Operating Cost: Expenses incurred to run the organization. This type of spending is related to the
provision of services. In an IT environment, operating costs include:
o Labor
o Maintenance fees
o Etc.

Budgeting overview continued: budgeting techniques
There are two key budgeting techniques used throughout this blueprint: incremental budgeting and zero-based budgeting.
Incremental Budgeting Zero-Based Budgeting
• Incremental Budgeting: Building the budget using the • Zero-Based Budgeting: Building the budget using zero
previous year’s budget or actual expenditures as a as the starting point. Generally, no previous expenses are
starting point. Generally, last year’s spending is assumed assumed to reoccur; every dollar forecasted needs to be
to reoccur and additional expenditures are derived from justified by being tied to a specific project, IT asset, or
adding onto this base. service.
Benefits: Benefits:
• Quick and easy: less time is required. • More accurate budgeting; all non-recurring items are
• Requires less data: data required for zero-based budgeting eliminated and forecasts are data-driven.
is difficult to obtain. • Budget is highly defensible.
Weaknesses: Weaknesses:
• Generally less accurate; non-recurring line items still have • Significant time and energy is required.
an expense forecasted. • Significant data is required.
• Can lead to wasteful spending and budget inflation.
Each budgeting technique is better suited to certain types of forecasts. However, flexibility to choose
may be limited if company policy dictates the use of a specific technique.
Sources: Bain & Company (Cichocki), CFO Magazine (Timmermans)

Establish a budget target
Finance will set an initial target; you need to choose whether you will meet or fight the target.
Overview
• Your goal is to help the organization achieve its objectives. Failure to get an adequate budget can undermine your ability
to deliver value. This will lead to criticism and poor organizational performance. On the other hand, money is often tight.
• The CFO will have an understanding of the fiscal goals of your organization. This will be used to translate goals into
budget expectations for the coming fiscal year.
• This could mean budget expectations ranging from +/- 5% to +/- 20% or more.
• Once expectations are communicated, two options exist:
Fighting the budget Meeting the budget

• If a budget reduction or insufficient increase is going to • Recognize that meeting organizational cost requirements
drastically reduce the ability of IT to deliver value, is part of being a “team player.” While these cost savings
then requesting additional funding right away may be may mean sacrifices, meeting the budget should be
necessary. your default course of action.
Begin with a clear vision; achieve consensus on how the story will unfold by agreeing on cost targets
and priorities. Fighting the budget has implications for next year’s budget; you can’t fight every
year, so choose your battles wisely.

Establish baseline metrics for this project’s success
Info-Tech’s approach will help improve baseline metrics through:

1. Increased forecast accuracy – Through using a sound cost forecasting methodology.
2. Improvement in presenting the budget – Through creating a visually appealing and engaging presentation.
3. Better budgeting rework process – Through identification of smart cost reduction opportunities and communication of
cost cutting trade-offs.
Metric Description Current Metric Future Goal

Annual Budget-Cost Variance +/- 2%
Number of Proposals Required Before Approval 2
Percent of Critical IT-Driven Projects Approved 100%

Align your metrics with COBIT to ensure project excellence
COBIT metrics will improve through:

1. Increased budget transparency and completeness – By soliciting feedback and validating budgeting information.
2. Alignment between IT and enterprise goals – By building a better understanding of value through discussions with
the business.
3. Improved budget accuracy – By applying more thorough techniques such as zero-based budgeting.
Metric Description Current Metric Future Goal

Number of budget changes due to omissions and errors 6 1
Number of deviations between expected and actual budget categories 7 3
Percent of alignment of IT resources with high-priority initiatives 90% 95%
Percent of overall IT costs that are allocated according to the agreed-on-cost 80% 90%
models
Percent of variance amongst budgets, forecast, and actual costs 10% 5%

Set budget targets and metrics
1.1.2 30-60 minutes
INSTRUCTIONS
INPUT
1. Review this blueprint material pertaining to budgeting success • List of potential
metrics. project success
metrics and targets
2. Select, add, and/or customize the metrics that apply to your
organization’s context.
OUTPUT
3. Set target levels for each metric selected.
• Selection of metrics
4. Reach out to the financial leadership of the organization and ask and target levels
them what the target budget should be for IT.
5. Determine whether to stick with their figure, or prepare to make the

case for why it should be different. Materials
• Excel sheet or other
Participants
• Budgeting team

Step (1.2): Collect and Organize Data
1.1 1.2 2.1 2.2 3.1 3.2

• Obtain the data sources you need.

• Clean up line items.
• Validate data from IT systems.
Good stories are grounded in real-world experience; an accurate budget should be data driven.
Get the data needed for accurate forecasting and perfect compliance with financial standards.

Perform budget reconnaissance
Get the information you need:
• Often, IT does not receive the information inputs they need (e.g. project pipeline, business unit
plans) until shortly before the IT budget is due.
• Consequently, getting the budget done on time – often after several late nights – means sacrificing
accuracy.
• Little time is left to prepare the budget presentation.
• Business units may be uncomfortable sharing planning information before submitting their final budget
proposal.
• The good news: the information does exist; business planning does occur long before formal
budgeting.
• You need to seek out this information.
• This is best done informally.
• Remember to position yourself as an ally who is trying to better support business initiatives; people
will be unlikely to provide information if they fear criticism.
Knowing about the initiatives business units will propose allows you to get a head start on
determining how IT will support initiatives and forecasting IT costs.

Collect the data you need to create a budget (1/2)
Good stories are grounded in real-world experience; an accurate budget

should be data driven. Get the data you need for accuracy and compliance.
Data Source One: The General Ledger From Last Fiscal Year
• Last year’s IT costs will be the starting point for forecasting costs. Often, forecasts will be based on last year’s
cost plus a percentage increase.
Data Source Two: The General Ledger From Two Fiscal Years Ago
• A longer history of IT costs is required for accurate forecasting. This will allow you to examine how IT costs have
grown. Often, applying the same growth rate is reasonable.
Data Source Three: Last Year’s IT Budget

• Looking at the assumptions and forecasting methods used last year will help. If the forecasts produced accurate
estimates, then using them again is reasonable.
Data Source Four: Your Organization’s Projected Income

Statement
• Some IT expenses are highly correlated with net sales or organizational spend on salaries and wages.

Collect the data you need to create a budget (2/2)
Good stories are grounded in real-world experience; an accurate budget

should be data driven. Get the data you need for accuracy and compliance.
Data Source Five: Departmental Plans
• Business unit activities drive forecasting; IT must set aside resources to support business projects. Additionally,
business unit technology spending results in spillover, increasing IT costs.
Data Source Six: Project Cost Breakdowns/Project Plans

• Costing analysis for major projects, both within IT and within business units, will be used for budgeting. Accurate
costing analysis may be used for forecasting capital and operational costs.
Data Source Seven: Last Year’s IT Budget

• Payroll, inventory tracking, and data on other systems will drive IT operating expenses. Additionally, storage
utilization will drive investment in capital assets.
Data Source Eight: Invoices

• The general ledger is not detailed enough; cross-referencing with invoices is necessary to ensure that line items
will carry forward and to determine the actual expense that will be incurred.
Data Source Nine: Benchmark Data

• Benchmarks can indicate whether or not a forecasting method produces a reasonable result. If a forecast method
results in significantly higher or lower spend than industry averages, confirm your assumptions.

Determine the appetite for IT spend
Identify the spend appetite associated with opportunities to innovate and implications.
• As you discuss the IT budgeting options, ask business stakeholders for their reaction to the ideas. Consider the following
prompts:
o Does this seem like an idea you would be willing to invest in? Why or why not?
o What would be an ideal IT investment?
o Where should we be looking to invest?
o Should we make capital investments?
Note: This exercise will give you a high-level understanding of the business’ view towards IT spend.
Example Capital Spend
“Based on preliminary discussions, the overall IT

budget will remain the same as the IT budget from Operational Spend
this fiscal year. However, there will be an emphasis
on decreasing operating costs and increasing
capital costs. The diagram demonstrates the ideal
state of the IT budget.” Current Target
Budget Budget

Example: IT spend scenarios Example
Scenario 1: Flood Value Creation Spending Scenario 2: Reduce All IT Spending

• The business requires • Overall IT budget is too
new products or services high; however,
to remain competitive. breakdown is
reasonable.
• Heavily invest in
innovative value-added • Eliminate capital
services. investments that bring
little value and reduce
Capital Spend operational spending.
Current Target Operational Spend Current Target
Scenario 3: Increase Overall Spending Emphasizing Scenario 4: Reduce and Reinvest Operational IT Spending
Value Creation
• The company cannot
• The company is afford to spend more
moderately positioned in money on IT and would
the market but requires like to see optimization of
growth to remain operating costs.
competitive.
• Reduce operational
• Increase overall spending to shift savings
spending in both capital to capital investments.
Current Target and operational budgets. Current Target

Conduct interviews to retrieve the budget information you
require
1.2.1 30-60 minutes per interview
INSTRUCTIONS
INPUT
1. Download Info-Tech’s IT Budget Interview Guide. • List of budget
2. Review the questions provided and customize as needed. stakeholders
(business unit and
3. Schedule interview meetings with the relevant business unit and department leads. department leads)
4. Conduct interviews and record them in the interview guide.
OUTPUT
5. Save and create a new guide for each interview.
• Completed interviews
Download Info-Tech’s IT Budget Interview Guide template to

help you conduct and document your interviews.
Materials
• Info-Tech’s IT Budget
Interview Guide
You will use the information collected in these interviews to guide your budgeting process. Participants
These interviews will help inform the budget presentation from the perspective of:
• CIO
• Alignment • Direct reports
• Cost
• Benefit
Make sure to consider these aspects of the budget and budget presentation as you
conduct your interviews.

Use Info-Tech’s data-driven research to develop budgeting
benchmarks
Info-Tech’s Budget and

Staffing benchmark reports
can provide a sanity check for
forecasting. Complete the
benchmarking survey to get
detailed peer comparisons.

Clean up line items before creating your budget
Budget items have a way of surviving after they are no longer needed.
Why line items become outdated What to do about it
• Budget line items are often outdated. This is especially • These line items can kill your budget’s credibility:
true if your organization uses incremental budgeting. o CFO: “What’s this expense here?”
• There are a number of reasons why a line item in the o CIO: “Oh, that shouldn’t be there…”
budget may no longer be incurring a real expense,
including: • Go through the budget and eliminate all line items that
no longer incur an associated expense.
o Product name changes. If a product changes names, a
new expense item may be created by finance, resulting • This is done line by line at the invoice level.
in double-counting. • This may be a large effort; in some cases, it has taken
o Expenses are associated with a service that is now four people a full month of cross-referencing accounts
outsourced. payable to budget line items to complete the task.
o Expenses for consulting and other professional
services are no longer being incurred.
o Expenses for labor no longer exist due to attrition or
restructuring.
o There are expenses for depreciation of retired assets.
Cleaning up line items can be a huge effort for large organizations. If you’re crunched for time, this
may not be an option. However, the inaccuracies caused by outdated line items can add up
over time, so complete the clean-up within three years or less.

Validate data from IT systems before creating your budget
If you’re going to use data for forecasting, make sure the data is accurate.
Why line items become outdated
• Bad data drives bad forecasts.
Data Quality Issues
• In some organizations, payroll systems can either house
inaccurate data or be mined incorrectly. The result is that
headcount is either inflated or deflated.
• Make sure that your payroll system is up to date;
contact the system owner and ask about data before Duplicate Data Incomplete Data
forecasting. • Multiple entries of a • Data record missing
• Another source of inaccuracy can be derived from data single record. required fields.
used as cost drivers for service-based costing.
Stale Data Invalid Data
• For example, a service cost driver may be the number of
users. If the user counts are inaccurate, licensing or • Record is outdated, • Record with
service costs may be misrepresented. leading to inaccuracy. inaccurate fields.
• Additionally, the data driving allocation methods used to Conflicting Data
determine service costs may be inaccurate.
• If you do not have good enough data for complex • Instances of a record
forecasting methods, use simpler methods. do not match.
Data should be a helper, not a burdensome obligation. For both capital and operating costs, use
the most accurate forecasting method for which data is available. Never try to use a “better” method
that requires “worse” data.

Validate budget data before forecasting
1.2.2 Time of completion: variable
INSTRUCTIONS
INPUT
1. Go through the budget and eliminate all line items that no longer • A comprehensive set
incur an associated expense. of budget invoices
◦ This is done line by line at the invoice level.
2. Make sure that your payroll system is up to date; contact the system OUTPUT
owner and ask about data before forecasting.
• A validated set of IT
3. Look for potential data quality issues: costs
◦ Duplicate Data
◦ Incomplete Data Materials

• N/A
◦ Stale Data
◦ Invalid Data
Participants
◦ Conflicting Data
• Budgeting team

If you want additional support, have our analysts guide
you through this phase as part of an Info-Tech workshop
Book a workshop with our Info-Tech analysts:
• To accelerate this project, engage your IT team in an Info-Tech workshop with an Info-
Tech analyst team.
• Info-Tech analysts will join you and your team onsite at your location or welcome you to
Info-Tech’s historic Toronto office to participate in an innovative onsite workshop.
• Contact your account manager (www.infotech.com/account), or email
Workshops@InfoTech.com for more information.
The following are sample activities that will be conducted by Info-Tech analysts with your team:
Assemble the budget team and reach out to key stakeholders

1.1.1 A budget team will be assembled and meetings with key stakeholders (business unit
heads, project managers, finance executives) will be scheduled to discuss the
budgeting project.
Set budget targets and metrics

Metrics will be selected based on organization’s context and target levels will be set
1.1.2 accordingly. The target budget for IT will also be determined based on input from
financial leadership.

Conduct interviews to retrieve the budget information you require

1.2.1 Interview meetings with the relevant business unit and department leads will be
scheduled. Interviews will also be conducted using Info-Tech’s IT Budget Interview
Guide.
Validate budget data

Budget data will be validated by going through the budget and eliminating all items
1.2.2 that are no longer an associated expense. The budget will also be validated by
making sure the payroll system is up to date and confirming that there are no data
quality issues.

PHASE 2
Build
Build an IT Budget
Phase 2 outline
Guided Implementation 2: Build

Proposed Time to Completion (in weeks): 1-2

• Build the budget

• Forecast capital costs
• Forecast operational costs

IT Cost Forecasting Tool

Step (2.1): Forecast Capital Costs
1.1 1.2 2.1 2.2 3.1 3.2

• Budget for the capital costs of innovation, maintenance, and business projects.
• Understand best practices for capital budgeting.
When it comes to capital costs, the story must be detailed and accurate. Zero-based budgeting
prevents budget inflation and captures detailed expenses.

Forecast capital costs
INSTRUCTIONS
INPUT
1. Download Info-Tech’s IT Cost Forecasting Tool. • List of IT accounts
and business units
2. List the accounts on your IT department’s chart of accounts. • List of new projects
and related costs
3. List the business units that are major IT clients.
4. Input and categorize new projects for this fiscal year. OUTPUT
• Completed forecast
5. Input and categorize the costs driven by the new projects. of Capex
6. Analyze the forecasted capital costs as needed.
Materials
7. Save and use visuals for budget presentation as needed.
• Info-Tech’s IT Cost
Forecasting Tool
Download Info-Tech’s IT Cost Forecasting Tool to help you forecast Participants

capital costs.
• CIO
• Direct reports
Do not label discretionary costs as non-discretionary to try to get the funding approved; this can hurt
the credibility of your budget.

Financial budgeting vs. managing money
This blueprint is designed to assist with financial budgeting.

Blueprint Focus Views of Budgeting
Financial accounting requires that spending be Managerial View
separated into capital and operating categories.
However, that is not convenient for money

managers who must spend the money. Projects Services
As a CIO, you must be able to view money from
both perspectives:
Capital Capital
Capital
a) To provide finance with the data they need.
Financial View
costs of costs of
b) To spend money towards IT that delivers projects services
maximum value.
This blueprint’s purpose is to help you meet
Operating
finance’s budgeting requirements. Therefore, Operating Operating
it assists in constructing a budget from a costs of costs of
financial view. projects services

Use zero-based budgeting to forecast capital costs
When it comes to Capex, the story must be detailed and accurate. Zero-based
budgeting prevents budget inflation and captures detailed expenses.
Zero-Based Budgeting Definition
• Building the budget by using zero as the starting point. Generally, no previous expenses are
assumed to reoccur; every dollar forecasted needs to be justified by being tied to a specific
project, an IT asset, or a service.
Pros and Cons How to Use Zero-Based Budgeting

• The majority of capital costs are project driven and should
be detailed in project plans. These planning documents
Benefits: will be your starting point for zero-based budgeting.
• More accurate budgeting; all non-recurring items are • For some capital projects, it is best to forecast multiple
eliminated and forecasts are data driven. scenarios: a high scenario and a low scenario.
• Budget is highly defensible.
• The high scenario is the cost of an optimal solution, one
that provides the highest level of capabilities, features, or
Weaknesses:
benefits. The high scenario is the more expensive option.
• Significant time and energy is required. • The low scenario is a scaled-back solution, one that
• Significant data is required. provides only core capabilities, features, or benefits.
• Capital costs should be categorized by what type of
projects drive them: discretionary or non-discretionary.

The composition of capital costs
Capital costs are composed primarily of costs driven by capital projects.

There are three main types of projects:
Maintenance Projects
1 • Projects that result in an extension of the useful life of an IT asset or mitigate the risk of asset
failure.
Innovation Projects
2 • Projects that result in new capabilities, ways of operating, or value.
Business-Driven Projects
3 • Projects led by other business units that have an IT component, must be supported by IT, or will
have an operating or capital effect on IT costs.
See Info-Tech’s Develop a Project Portfolio Management Strategy blueprint for guidance on
prioritizing projects.

Forecast the costs of maintenance projects
Maintenance Projects
• Projects that result in an extension of the useful life of an IT asset or mitigate the risk of asset failure.
Examples of Maintenance Projects Tips for Forecasting Maintenance Projects

• Repair a server. • Remember to account for the effect of taxes and shipping
• Data center routine maintenance. that may be required to repair assets.
• Fix performance issues encountered on specific IT • Repairing or replacing assets has a labor component;
systems. people are required to install and configure new or newly
repaired assets.
• Repairing existing assets can affect depreciation expense;
often the net book value of the asset is increased resulting
in an increase in depreciation.
• Often, you can delay maintenance projects if capital is
tight. However, this will put upward pressure on operating
expenses.
Remember to account for reductions in operating expenses caused by capital investment in

maintenance. Reductions in day-to-day maintenance, repairs, support, and downtime can often be
expected.

Forecast the costs of innovation projects
Innovation Projects
• Projects that result in new capabilities, ways of operating, or value.
Examples of Innovation Projects Tips for Forecasting Innovation Projects

• Implement a knowledge management system for help • For all types of projects, remember to include the cost of
desk employees to share resolution techniques. taxes. Often vendors will not include taxes in informal
• Restructure database to reduce query time. price quotes.
• Provide training to improve the technical skills of staff. • For all types of projects, include shipping expenses.
• Zero-based budgeting makes including a risk multiple
difficult; risk multiples will generally be highly visible and
will decrease your ability to defend your budget.
Do not pad key innovation project budgets; building the case for approval is difficult enough as is
and increasing the net cost won’t help. Not all projects will materialize, creating funds from the
deferral of planned projects.

Forecast the costs of business-driven projects
Business-Driven Projects
• Projects led by other business units that have an IT component, must be supported by IT, or will have an
operating or capital effect on IT costs.
Examples of Business-Driven Projects Tips for Forecasting Business-Driven Projects

• Marketing is acquiring a marketing automation system. • Business projects are often budgeted for by business
The system will require IT support and integration units, but IT expenses are often not considered.
assistance. • Identify additional costs that the IT department will incur.
• Sales is acquiring a lead management system. The • Common underestimated costs include:
system will require IT support, integration, and
maintenance. o Labor for integration.
• The company will begin marketing in another country by o Labor for configuration.
launching email campaigns. Email lists must be mined by o Labor for support.
IT employees. o Software licenses for IT staff who will be supporting
newly procured systems.
You do not always have to bear the burden of additional costs. Often, the business unit leading the
initiative will take on costs. Talk to business units about the costs of their initiatives and ask for
funding. Make sure there is no duplication.

Use shadow IT as a catalyst for IT innovation
Be a partner with the business and show it how working with IT can make its
dollars go farther than if it ventures out on its own.
Shadow IT Facts Using It to Your Advantage

• Most IT leaders underestimate the amount of shadow IT in • Get involved early; by encouraging business units to
their organization. utilize their budget to procure technology you can
• A significant portion of all technology spending is ensure innovation without needing additional money in
controlled by business units. your capital budget.
• Almost half of business unit IT spending is directed at • Furthermore, this will put you in the know; you will gain an
innovation or building new capabilities. understanding of new business-led IT initiatives in the
pipeline.
• IT cannot match this: 80% of IT budgets are spent just
keeping the lights on and the remaining 20% is largely • This allows you to budget for the impact they will have on
consumed supporting new business-led initiatives. IT.
• Shadow IT has been looked at as the enemy. Too often, • You can set aside a portion of the capital budget to assist
the CIO is blindsided by new technologies procured by with integration and deployment and a portion of the
business units, and unexpected integration and support operating budget to provide support.
activities eat away at the IT budget.
Source: Info-Tech Survey
Shadow IT is not the enemy; bringing IT procurement by business units out into the open allows IT
to influence innovation spending and predict the impact of support on IT operating costs.

Determine how ongoing projects affect your costs
Net new projects are only one component of capital expenditure; there will be capital
effects of ongoing projects.
Overview
• Ongoing projects that were approved during a previous fiscal period likely have not all concluded.
◦ You need to identify the capital and operating costs that will be incurred this fiscal period.
• Talk to project managers and review project budgets and actual expenditures.
◦ If expense forecasts have been reasonably accurate, simply use the most recent project forecasts.
◦ If actual spend to budget differ drastically, have your finance team review project budgets to make adjustments.
• Computing the effects on ongoing projects is complicated by payment delays for organizations that use cash-based
budgeting, where expenses aren’t recognized until cash is paid, even when the activity occurred some time ago.
• When suppliers are late collecting payments, or delays push payment periods back into another budget year, accruals
must be used to manage overflows.
◦ These accrued expenses can inflate this year’s total budget and deflate last year’s actual-to-budget comparison.
◦ When possible, use accrual budgeting for these types of scenarios. Ask finance if this is acceptable.
Sample Scenario Implications

• An ERP implementation occurred last fiscal year. • To account for delays, the costs that were expected to be
According to the budget, the implementation was incurred last year must be prorated to this fiscal year. If
expected to cost $20 million and conclude halfway further delays are expected, costs may flow through to
through this fiscal year. The project was delayed and next fiscal year. Also, the costs must be reassessed to
integration difficulties increased the net project account for the 10% increase.
expense by 10%.
Capital vs. operating leases
Strong incentives to classify leases as operating leases exist, but you need to make sure
you’re not breaking rules.
Capital Lease Operating Lease
• The lessor transfers some capacity of ownership to the • The lessor transfers the right to use the asset to the
lessee in addition to the right to use the asset. lessee. The lessor maintains ownership of the asset.
• Has financial implications: • Has financial implications:
o Expense is recognized on balance sheet. Both an o Expense is not recognized on the balance sheet.
interest expense and depreciation expense is incurred Income statement expenses reflect actual lease
on the income statement. payments.
o Operating leases allow you to keep debt off the books.
How to choose
There are five major things to consider:
1. Is maintaining ownership of the asset at the end of the lease term important? If so, a capital lease is preferred.
2. Do you have room in the capital budget but not the operating budget or vice versa? An operating lease may be the only
option if there is no room in the capital budget.
3. What does finance prefer? If finance prefers to capitalize all leases, then you should be compliant as much as possible.
4. Can you afford the risks of ownership? In capital leases, you are exposed to the risk of asset failure. An operating lease
may be preferred if you cannot afford repairs or replacement; generally, you can end an operating lease if the asset fails.
5. Is the lease required to be capitalized by law? Generally, leases must be capitalized if the lease life exceeds 75% of the
asset, if ownership is transferred at the end of the lease term, if there is an option to purchase the asset at a below
market value price, or if present value of lease payments exceeds 90% of the value of the asset.

Best practices for forecasting capital costs
Follow these guidelines to avoid the common pitfalls of capital budgeting:
1
Look for Ways to Improve Cash Flows:
• A dollar today is worth more than a dollar tomorrow. Try to negotiate favorable payment terms with
suppliers that do not necessitate large upfront payments. Scheduled (and delayed) payments are
better for the business.
2
Smooth Spending to Keep Projects Manageable:
• Do not front load your capital projects; while launching projects immediately after the budget is
completed results in the soonest possible completion date, launching too many projects makes project
management difficult. Slow and steady wins the race.
3
Don’t Count on Deferral of Planned Projects:
• Not all of the projects that are budgeted for actually launch. This creates a capital pool for funding
operations and other projects that arise as the fiscal year progresses. However, relying too heavily
on project deferral can cause issues; if a large proportion of projects proceed, then money may be
very tight.

Step (2.2): Forecast Operational Costs
1.1 1.2 2.1 2.2 3.1 3.2

• Budget for the operating costs by accounting for inflation, changing labor costs, changing prices,
changing service levels, and the effects of capital projects.
• Understand best practices for capital budgeting.
Forecasting operating costs requires an accurate view of historical costs and an understanding of
how business changes will affect IT costs.

Use Info-Tech’s IT Cost Forecasting Tool to forecast your
operating costs
INSTRUCTIONS INPUT
• Last year’s operating
1. Download Info-Tech’s IT Cost Forecasting Tool. costs
2. List the accounts on your IT department’s chart of accounts.

3. List the business units that are major IT clients. OUTPUT
4. Input operating costs from the previous fiscal year. • Opex forecast
5. Input the expected increases in various factors such as inflation, vendor

prices, labor costs, and service levels. Materials
6. Analyze the forecasted operating costs as needed.
Forecasting Tool
7. Save and use visuals for budget presentation as needed.
Participants
• CIO
Download Info-Tech’s IT Cost Forecasting Tool to help you forecast • Direct reports
operating costs.

Use incremental budgeting to forecast operating costs
Incremental Budgeting Definition

• Building the budget by using the previous year’s budget or actual expenditures as a starting point. Generally, last
year’s spending is assumed to reoccur and additional expenditures are derived from adding onto this base.
Recap Pros and Cons How to Use Incremental Budgeting

• Start with last year’s operating results.
• Identify increases (or decreases) caused by changes in
Benefits: operations, contract prices, inflation, and demand.
• Quick and easy: less time is required. • Changing regulations may also result in additional
• Requires less data: data required for zero-based budgeting expenditures. Make sure these costs are accounted for.
is difficult to obtain.
• Try not to over-budget; it will decrease the credibility of the
Weaknesses: budget and result in budget variance.
• Under-budgeting will also cause problems: in many
• Generally less accurate; non-recurring line items could still organizations, performance is assessed based on how
have an expense forecast. closely actual costs mirror the budget.
• Can lead to wasteful spending and budget inflation. • Improve the accuracy of your incremental cost forecasts
by zeroing in on the specific components that affect cost.
When it comes to budgeting for operating costs, striving for perfection can grind your story to a halt.
Incremental budgeting allows for acceptable accuracy without introducing unnecessary complexity.

Determine the effect of inflation
Inflation results in an increase of all costs.

Inflation Definition
• A general increase in the cost of goods and services.
Accounting for Inflation

• In most developed nations, central banks control inflation,
resulting in an inflation rate of 2-4%.
• The finance department generally provides an Inflation is when you pay fifteen dollars
inflation rate for budgeting; if they do not, request for the ten-dollar haircut you used to get
one.
• An accurate inflation rate prediction can usually be
for five dollars when you had hair.
obtained from a quick online search.
• Remember: when you increase a line item by the rate – Sam Ewing
of inflation, don’t increase it further for increases in
labor and contract prices unless they increase by
more than the inflation rate. To do otherwise is double
counting.
Inflation can be used to forecast costs when very little data for forecasting costs exists. But beware:
it is easy to double count. Don’t add increases for inflation and increases for other factors
(such as labor) that are driven by inflation.

Determine the effect of changing vendor pricing
If vendor pricing goes up, so do your costs. Unless you fight back.
Vendor Pricing Definition
• The amount of money paid to vendors for software, hardware, and other services.
Accounting for Vendor Pricing Everything is negotiable. Whether or not

• Vendors increase prices on an annual or semi-annual the negotiation is easy is another thing.
basis. The increase is generally 4-8%.
• Vendor pricing for software licensing and support will be – Carrie Fischer
derived from negotiations with vendors or contracts.
• Review vendor contracts and reach out to vendors for
Get the service quoted by at least three
prices. Remember to negotiate for lower prices.
• If no response is received from a vendor and no increase other suppliers. I let the supplier know
is indicated in the contractual agreement, assume that that I am getting quotes and will go with
pricing increases at the same rate it did last year. the best one available. This creates some
• For example, if the price of one software license increases competitive pricing.
5% and another contract increases 0%, and both make up
50% of the total expense, then an increase of 2.5% should – DC Fawcett, Paramount Digital Publishing
be applied to the total expense.
While some of these pricing increases are non-negotiable, some represent opportunities for cost
savings. Don’t be afraid to pick up the phone and call a vendor’s competitor for a quote or ask
your vendor for justification of the increase.

Tips for negotiating with vendors
These three negotiation techniques can help you save money.
1
Trade Extension of Term for Price Reduction:
• Vendors will often agree to lower the rate for an extension of the contract term.
The risk that prices will go down, resulting in overpayment in the future is not significant.
If the price does decrease, you can always pick up the phone and demand market rate.
2
Demand Market Rate:
• Often, built-in contract increases will result in paying above market rate. Do your
homework to identify these inflated contracts and then reach out and demand the
contract be adjusted. Tell them you will not pay above market rate and they will often
acquiesce.
3
Obtain Multiple Quotes:
• Nothing can get a supplier to lower their prices faster than informing them that
their competitor will provide you the same service for less. When contracts expire,
explicitly tell vendors that you will be obtaining multiple quotes and going with the most
attractive option. This encourages competitive pricing.

Determine the effect of changing labor force costs
Your people are expensive. How expensive they are depends on a few things.
Labor Force Definition
• The members of a particular organization who perform work.
Accounting for Changing Labor Costs

• Changing labor costs include increases in the salaries, Many IT departments continually budget
wages, and benefits payable to existing employees and assuming they will fill all of the positions
they plan to fill. However, as people are
the costs of hiring new employees.
hired, attrition keeps headcount more
• Increases are driven by three major factors: stable than planned.
o Raises: increases in compensation.
o Benefits: benefit providers’ increase rates. • Consequently, CIOs are forced to
o Hiring: headcount increases. defend over-budgeting on labor. Some
• If the raise negotiation period does not directly precede experts recommend cutting 60-80% of
the unfilled positions from the budget
the budgeting period, it will be difficult to predict raises.
while continuing to seek employees for
• Mine data from payroll and determine the increase last all open positions. This generally results
year. This can be used as a proxy. in less budget-cost variance.
• If your organization is growing, then IT services need to
be provided to more clients. This could mean increasing
headcount to provide support and manage services.
• There will also be labor implications of new and ongoing
capital projects, which will be addressed later.

Determine the effect of changing service demand
As your organization grows, the demand for IT services grows. Make sure
this is accounted for in your IT budget.
Service Demand Definition
• For our purposes, service demand can be defined as the number of clients who request IT services.
Accounting for Changing Service Levels

• Even when no organic organizational
• The growth of labor force and increasing transaction growth occurs, the demand for some
volumes directly affect IT costs. IT services will grow. For example,
• More seats are required for departmental users of storage usage will increase perpetually
as new data is added to existing
applications and basic provisioning must be provided.
volumes.
• Additionally, there will be costs driven by end-consumer
purchasing behavior. • Determining the percentage increase
• If users are the cost driver for a cost, use data from can result in a reasonable proxy.
payroll to identify expected growth rate. However, service-based costing is
• If the number of users of specific systems is not tracked, required for forecasting operating costs
with the highest degree of accuracy.
contact business units and request user estimates.
• In lieu of this information, revenue growth, as forecasted
on the organization’s projected statement of earnings for
this fiscal period, may be used as a proxy.

Account for the operating effects of capital projects
Both new and ongoing projects will affect your IT costs this fiscal year.
Overview
• Projects generally have a project plan that includes a cost breakdown. While best practice is to separate capital and
operating costs in these plans, sometimes this doesn’t occur.
• If operating and capital costs are not separated, then take time to separate the costs. For this section, only operating
costs need to be considered.
• For both new and ongoing projects, make sure their effect on labor, demand, and vendor pricing is accounted for.
New Project Ongoing Project
• New Project: Any project, within business units or IT, that • Ongoing Project: Any project, within business units or IT,
is being operationalized this fiscal year. that was operationalized prior to the start of this fiscal year
• The operating effects of new projects are difficult to and is not yet completed.
predict, unless included in the project’s original business • The operating effects of ongoing projects have likely
case. already begun to occur. Often, it is easier to see what
• However, little can be done to improve the accuracy, so these effects will be now that the project is ongoing.
accept project breakdown costs unless the numbers • Revisit initial project cost estimates and determine if
seem unreasonable. they have been accurate.
• Many new projects that are expected to launch this year • If cost estimates have been inaccurate, adjust cost
will not actually launch; project deferral, which causes estimates for this fiscal year based on last year’s cost
budget-cost variance, is inevitable. estimate and actual cost variance. For example, if the
• New IT assets will need to be depreciated. Depreciation operating impact was much greater than expected,
expense will therefore be affected. Check with finance to increase the estimates for this year’s costs as well.
determine what method should be used.

Use service-based costing to forecast operating costs if greater
accuracy is required
Use Info-Tech’s Establish a Service-Based Costing Model blueprint to
determine your service costs.
Service-Based Cost Definition
• For any given IT service, the expense incurred to produce a single unit of output.
Service-Based Costing Definition

• The process of determining service-based costs. This process involves the identification of all
direct costs and the allocation of indirect and overhead costs that are attributable to services.
Using Service-Based Costing Examples

• Forecasting the costs of your services can be done with • Basic cost forecasting example: the email service costs
great accuracy using service-based costing. $500,000 per year and there are 1,000 email users. The
• Basic service-based costing means determining the unit unit rate is therefore $500 per user.
rate of delivering a service. This unit rate can be multiplied o Next year, there will be 1,200 email users. Therefore,
by next year’s expected demand. email service will cost $500 * 1,200 = $600,000.
• But basic service-based costing tends to overestimate • Advanced cost forecasting example: email service
costs because it assumes that costs will scale up linearly. costs $500,000 per year, $200,000 of which is fixed and
• Use advanced service-based costing for cost forecasting: $300,000 is variable. There are 1,000 email users. The
advanced service-based costing means you have variable unit rate is therefore $300 per user.
determined the unit rate of delivering a service and broken o Next year, there will be 1,200 email users. Therefore,
the costs down into variable and fixed components. email service costs $300 * 1,200 + $200,000 =
$560,000.

Don’t use service-based costing if your service costs are not
accurate
Service-based costing is only viable if your cost attribution methodology is
accurate and complete.
How Service-Based Costing Goes Wrong Service-Based Costing Checklist
• Service-based costing is a highly complex process and  My organization has a service catalog.
the vast majority of organizations either don’t do it at all or  My organization has a service-based cost model that uses
don’t do it well. service-catalog definitions.
• Services are often not clearly defined, resulting in omitted  My organization’s service-based cost model uses evenly
or redundant costs. spread allocation for less than 20% of overhead and
• Service-based cost models often have an overreliance on indirect costs.
simplistic cost allocation, leading to misallocated costs.  My organization’s service-based cost model is supported
• For many organizations, the data required for more by accurate and up-to-date data.
accurate allocation (such as activity-based allocation) is  My organization’s service-based cost model accounts for
unavailable. service-to-service consumption.
• Most organizations do not account for the consumption of  My organization’s service-based cost model categorizes
IT services by other IT services. costs as fixed or variable.
• Most organizations do not know which portion of IT • Use Info-Tech’s
service costs are fixed and which are variable. Establish a Service-Based Costing Model blueprint
to figure out your service costs.
Service-based costing can be used to achieve a much higher degree of accuracy than traditional
budgeting methodology. However, garbage in equals garbage out. Your service-based cost
model must be accurate to produce an accurate budget.

Best practices for forecasting operating costs
Follow these guidelines to avoid common pitfalls of operating budgeting.
1
Ask for help when needed:
• It is better to ask finance executives how they would handle an uncertainty than to
make an unsubstantiated assumption on your own. This will help foster collaboration
and make use of the financial expertise of other members of your organization to
improve accuracy.
2
Make note of inefficiencies:
• The budgeting process is often frustrating; keep track of frustrations and make
recommendations on how the process could be improved. Pass this information on
to the owner of the budgeting process.
3
Get sufficiently granular:
• Large line items will have to be broken down into smaller categories. It is hard, for
example, to meaningfully estimate the change in all vendor prices. However, by
breaking it down and examining specific contracts, a reasonable estimate can be made.
However, you also need to limit granularity; it is not worth going down to the invoice
level for minor expenses.

Tech analyst team.
Forecast capital costs

2.1.1 Capital costs will be forecasted using zero-based budgeting. Info-Tech’s IT Cost
Forecasting Tool may be used to quantify and categorize the capital costs.
Forecast operating costs

2.2.1 Operating costs will be forecasted using incremental budgeting. Info-Tech’s IT Cost
Forecasting Tool may be used to estimate the effects of changing inflation, vendor
prices, labor costs, and service level on the operational costs.

PHASE 3
Sell
Build an IT Budget
Phase 3 outline
Guided Implementation 3: Sell

Proposed Time to Completion (in weeks): 1

• Sell the budget

• Aggregate and validate budget
• Sell your budget

IT Budget Presentation

Step (3.1): Aggregate and Validate Budget
1.1 1.2 2.1 2.2 3.1 3.2

• Ensure budget includes required information.

• Validate and fix anomalies.
• Share your budget internally.
Get a trusted opinion. Have an ally validate your budget before you present it to management.

Ensure your budget includes all required information
No matter how good a story is, it won’t be well received unless it is put
together nicely – no errors, well formatted, and easy on the eyes.
Title Your Budget:
• “Bill’s Barrels Co. Annual IT Budget for Fiscal Year January 1 st, 2014 – December 31st, 2014.”
Date Your Budget:

• “All cost estimates are based on forecasting as of March 31, 2012.”
State Your Budget Scope:

• “Cost estimates cover operating and capital costs, including depreciation and non-recurring
expenditures.”
State Your Budget Assumptions:

• “An inflation rate of 2.3% was applied to all service costs. Depreciation of IT assets was assumed
to be linear, as is consistent with GAPP principles for this type of IT asset.”
The overwhelming majority of professional documents should meet formatting table stakes: missing
required information means no credibility.

Look for and validate anomalies
Identifying numbers that don’t seem right:

• Expense is significantly higher than last year’s spend or benchmark comparisons.
• Expense is significantly lower than last year’s spend or benchmark comparisons.
• Expense is similar to last year and changing operations or pricing should have caused significant variance.
• Use Info-Tech’s IT Budget Metrics and Benchmarking.
Managing Anomalies Justifying Anomalies

• Check Excel formulae to determine if an error exists. • Just because a number seems wrong does not mean it is
• If incremental budgeting was used, determine if a factor wrong.
was double counted or omitted. • However, you need to assume that other people – both
• If incremental budgeting was used, consider using a internal and external – may question the number.
zero-based approach to reforecast the line item. • Be prepared to defend it: identify the factors that drove
• If zero-based budgeting was used, check for omissions the cost up or down and know how to communicate them.
and double counted components. “A vendor contract with Oracle is scheduled to be
renegotiated this year. Preliminary talks indicate that our
rate per user will increase by 10%. Additionally, 400 more
users will require access to the system this fiscal year.”

Share your budget internally and ask others to critique and
validate
A second pair of eyes might spot things you didn’t. It is better to have an ally
notice errors than to wait until you present the budget.
Getting help from internal peers Email the completed budget to

direct reports.
• Circulate the budget to your direct reports to verify costs
within their silo.
• Your direct reports may notice things you missed.
• Ask direct reports to look at other budget items. Ensure you get approval on all
• Assigning ownership is important; email direct reports costs reviewed.
individually, use active language, and set a date in your
request. “The budget presentation is coming up, and I am
assigning budget review tasks. You are responsible for
reviewing the forecasts for your own silo and for validating
the costs of the marketing automation project.” Review critiques and areas of
• This will help you identify errors and highlight the areas of disagreement.
the budget that are confusing. Finance will ask the same
questions your direct reports do.
Do not send the budget to external

reviewers before internal review
has concluded.

Optimize your budget: reduce budget through improved
efficiency
You can’t squeeze water out of a stone, but most IT departments aren’t
stones.
Application rationalization:
• Reduce the number of redundant and unnecessary applications your IT department supports.
Outsourcing:
• If a service you are providing costs more than it does if you were to buy it from a service provider,
ensure that there is good justification to do so, i.e. the service provides a competitive advantage.
Investment in more efficient assets:

• An IT budget may be overspending on operating expenses and underspending on capital assets.
In this scenario, investing in more efficient capital assets can reduce operating expenses.
You don’t get efficiencies in the first year. Usually, investment in efficiencies does not produce
benefits until year 2.

Outsourcing can lead to cost savings (1/2)
CASE STUDY Industry

Source
Banking
IBM
Challenge Solution Results
• In the late 1990s, banks were • Deutsche Bank launched a cost • Deutsche Bank was able to pass
investing heavily into IT transparency project to evaluate on rate-based charges to
infrastructure and systems. the cost of IT services. The business units directly.
• However, how this initiative focused on costing the • Increased service level: the e-
investment transformed into activities performed at computer
business and on-demand
business value was unclear centers in continental Europe.
technology provided by IBM was
and there was suspicion that • The findings resulted in the more flexible than Deutsche
funding was being used outsourcing of computer center Bank’s internal offering.
inefficiently. management to IBM and allowed • Deutsche Bank expects to realize
• As a result of the IT Deutsche Bank to have $1 billion in cost savings over the
department’s inability to transparent rate-based costs for first ten years of the agreement.
meter IT usage, show full the IT services it needed.
service costs, and allocate
costs to business, significant
parts of IT were outsourced.

Outsourcing can lead to cost savings (2/2)
CASE STUDY Industry

Source
Banking
WSJ
• ABN AMRO launched an • ABN AMRO negotiated an • Transparency of IT spend and

analysis of its IT services. It outsourcing contract with business value improved.
concluded that: Electronic Data Systems (EDS) • Performance metrics became
to provide technology services
1. Costs were very high, more available.
and application development.
2. There was poor • Cost savings increased.
transparency of how costs • IT governance improved.
were allocated to business
services, and
3. IT services represented
certain risks to the business.

Solicit budget feedback and revise
3.1.1 1–2 Business Days
INSTRUCTIONS
INPUT
1. Review the budget you have created and ensure it is ready to be • IT Budget
critiqued.
OUTPUT
2. Enlist the participation of fellow employees to review the budget you
have created. Ask them to identify anomalies within the budget and • A validated budget
with the documents used to create the budget. In particular, secure
the participation of: Materials
• CIO Direct Reports
Forecasting Tool
• Business Unit Heads
Participants
• Key Project Managers
• CIO
• Direct Reports
• Trusted Advisors
• Business Unit Heads
• Key Project
3. Receive feedback with an open mind and revise the budget if Managers
necessary. • Trusted Advisors
One bad number throws all your numbers into question. Look for
anomalies and fix underlying errors. If shocking numbers are correct,
be prepared to explain and defend them.

Step (3.2): Sell Your Budget
1.1 1.2 2.1 2.2 3.1 3.2

• Construct a budget presentation.

• Sell your financial budget.
• Find additional cost savings to meet rework requirements.
• Construct a revised budget proposal.
• Sell your revised financial budget.
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.

Use Info-Tech’s IT Budget Presentation to sell your budget
3.2.1 1-2 Business Days
INSTRUCTIONS INPUT
1. Discuss the charts generated by Info-Tech’s IT Cost Forecasting Tool and how they can Forecasting Tool
be used.
2. As a group, build the budget presentation. Walk through the presentation and populate it OUTPUT
slide by slide. • IT Budget
Presentation
3. Brainstorm questions that will be asked and possible responses.
Materials
Presentation
Download Info-Tech’s IT Budget Presentation to help you build a • Projector
budget presentation that demonstrates IT value delivery.
Participants
The presentation doesn’t stand on its own: bring supporting • CIO

• Direct reports
documentation, including all cost projections, major contracts,
assumptions made, and documentation of expert opinions.
No matter how good a story is, it won’t be well received

unless it is put together nicely – no errors, well formatted,
and easy on the eyes.

Use visual diagrams to make the presentation engaging
A picture is worth a thousand numbers. Even to financial analysts, too many numbers can be
confusing. Pictures bring clarity to your presentation.
Present the big picture of IT spending.

• This chart provides a lot of information; past
spending, forecasted budget total, and history of
meeting budgets.
Present the breakdowns of capital spending.

• This chart provides a lot of information; a
breakdown of the proportion of capital costs by
expense type.
Present breakdown of operating spending.

• This chart provides a lot of information; a
breakdown of the proportion of operating costs by
expense type.
Images created as graphic example only.

Be concise; you only have 30 minutes in most situations
You need to communicate a lot in the allotted time; this means you cannot
get too detailed.
Reduce Redundancy:
1 •
•
You don’t have time to say things twice.
You can repeat things to create emphasis, but do so sparingly.
Ignore Minor Costs:

2 •
•
As a rule of thumb, any cost that is less than 1% of your IT budget is not worth discussing.
If people want details, they can request your supplementary documents.
Keep Introductory Elements Brief:

3 • The mantra “tell them what you’ll tell them, tell them, then tell them what you told them” does not work. You
have time to tell them once. Limit introductions to 5% of total presenting time.
Practice:
4 • “Umm” and “ahh” take up time. Being ready to communicate clearly and efficiently means having gone
through the presentation at least twice prior to the formal presentation.
Telling the story well is as important as the story itself. Establish credibility and communicate
clearly.

Start with an overview of forecasted IT spending and historical
spending
Historical performance will not only help build credibility, but also set a
reference point for assessing this year’s funding requirements.
History of IT Budget-Cost Variance and Projected Spend [Insert Year -2014]
$30,000,000.00
$25,000,000.00
$20,000,000.00
$15,000,000.00
$10,000,000.00
$5,000,000.00
$0.00
2010 2011 2012 2013 (Current) Proj. 2014
* Graphic created for illustrative purposes.
Budget Actual
Establishes Credibility Provides a Reference Point
• Emphasize the accurateness of your forecasts; make a • $1 billion dollars might seem like a large budget. However,
note beside the years that IT was able to deliver on if last year’s IT spend was $1.6 billion dollars, then it is
budget. actually a sizable contraction in IT spending.
• Demonstrate that IT has a history of delivering on • Often, your IT spend will be growing to support the growth
budget, bringing credibility to forecasts and promoting of the organization and new IT and business-led
confidence in IT. initiatives.
• Explain variance: If you were over and under budget, • Showing IT budget growth over time makes it easy to see
explain the factors that affected IT spending. Explain how how IT spend correlates with business growth. “Our IT
you will account for this type of variance this year and how budget is 6% higher than last year, which is reasonable
these factors are accounted for in your forecasts. considering the 9% organic business growth and the new
initiatives being launched this fiscal year. This is in line
with the IT spending growth experienced in the past.”

Obtain benchmark data to compare your costs
Obtaining good benchmarks isn’t easy. Use these data sources to obtain
them. But don’t bother if your organization doesn’t care about benchmarks.
Data Source 1: Use Info-Tech’s Measure IT

• Info-Tech’s Measure IT is a benchmarking initiative with more than 12,000 data points.
• The Cost and Budgeting Measure IT shows an overview of capital and operating expenditures and spend in
specific areas as a percentage of sales.
• The Staffing Measure IT shows direct labor time spend on services.
• Measure IT will not provide you with everything you need to benchmark your forecasts, but it can provide a solid
foundation.
Data Source 2: Consulting Firms

• Often, consulting firms and industry research houses compile benchmarks.
• Reach out to firms you have a relationship with and ask if they can help.
Data Source 3: IT Financial Management Solutions

• IT financial management solutions, such as Nicus, Apptio, and ComSci, provide benchmarks.
• While it is certainly not worth procuring a solution for the benchmarks alone, if you are procuring a solution, make
sure you take advantage of the benchmarks.

Validate benchmarks to ensure reliability
If the benchmarks are going to be used to justify forecasts, then you need to
make sure your benchmarks are valid.
Organization Using Benchmark Sample Facts
Industry: Auto Manufacturing Last Fiscal Year Revenue: $100,000,000
Benchmark Checklist: Benchmark Example
Benchmarks should meet all five (5) criteria Benchmark: Cost per ticket for help desk: $50.46
 The data is less than two years old. Things change
quickly in IT; the effect of increasing cloud-based • Data dated April 2017.
services has drastically changed service costs.
 The data has an N count above 200. Low N counts • N Count: 312
make data statistically insignificant. If no N count is
provided, assume invalidity.
• Source: Help desk solution vendor
 Benchmark source is impartial. Make sure the source is
unbiased.
 Benchmark is applicable to the same industry as the • Industry: Pharmaceuticals
organization using the benchmark.
 Benchmark is applicable to organizations of a similar • Revenue: $10M-$50M
size.
Benchmark is invalid.

Remember that benchmark variance doesn’t always mean
you’re not delivering value
Overview
Benchmarks allow you to say “this level of spending is on par with industry averages.” Emphasize services and line items
that are below industry average. Explain how your business model accounts for spending above benchmarks.
Service Level Explains Benchmark Variance:
• Providing a higher service level will result in higher costs.
Sourcing Strategy Explains Benchmark Variance:

• Dealing with premium suppliers, whether they are software, hardware, or service vendors, will result in higher
costs.
Geography Can Explain Benchmark Variance:

• Operating in a high GDP per capita country with high minimum wages and an educated workforce will result in
higher costs.
Other Factors Can Explain Benchmark Variance:
• Additional security costs, a recent merger, and temporary inefficiencies caused by technology changes are other
reasons costs may be higher.
A lean IT department can’t squeeze dollars out of rocks. Tie budget reductions to service reductions
and deferred projects to make the implications known to everyone.

Finding cost savings: reduce budget through service reduction
or elimination
If a secondary proposal must find cost savings, re-examine the viability of IT
services.
Targeting Services Using Service-Based Costing to Assess Services
Your IT service catalog can be used to examine • Service-based costing can be used to assess
services systematically. service viability. If the unit rate of providing a service is
• Core services – services that directly support revenue known, you can ask business units if they would be
willing to pay the unit rate to receive the service. If the
generation – cannot be cut and analysis of how
answer is “no,” then the service may be costing more
decreasing service levels will affect the business must
than it is worth.
be thorough if service reduction is considered.
• Because service-based costing uses cost allocation,
Focus on “nice to have” services:
eliminating a service may result in fixed costs being
• If a service has become significantly more expensive – allocated to other services, resulting in changing
perhaps because of increasing licensing fees – the service costs. In the event of chargeback, business
business case should be re-examined. units may resent these changes.
• If services are going to be cut or reduced, make sure
service-level agreements are adjusted and the changes
are communicated throughout the organization.
Eliminating a service does not eliminate all associated costs. Some costs are “sticky.” Employees
that were previously providing the service will remain employed and fixed assets, such as
infrastructure, will still be in operation.

Finding cost savings: reduce budget using asset lifecycle
management techniques
If a secondary proposal must find cost savings, re-examine your asset
replacement strategy.
Asset Management for Capital Budgeting Asset Management for Operating Budgeting
• Increase the in-service life of an asset by

decreasing the refresh rate: this will decrease year- • Decrease routine maintenance: decreasing routine
over-year capital expenditures. However, this will maintenance will save money. The trade-off is that
increase the fail rate of IT assets, sometimes reducing routine maintenance can reduce the useful life
necessitating unplanned replacement. This unplanned of the asset and increase the risk of needing repairs.
replacement may increase budget-cost variance and, in
the case of large assets, may increase the risk of
needing additional funding.
The Next Frontier
• Buy less expensive assets: generally, quality and
price are correlated. However, it may make sense to • The next frontier for large organizations is data-
buy two cheap servers instead of one top-of-the-line driven asset replacement. If you have 200 of the
server. Again, this reduction in capital cost may come same servers, you can keep track of repairs and
at a cost – whether that is a reduction in functionality or maintenance costs and use the data to forecast future
higher failure rates. failure rates and expenses. When forecasted expenses
exceed replacement costs, it is time for replacement.
1. As a rule of thumb, routine maintenance has a positive ROI for expensive assets, but not for inexpensive
assets.
2. Investment can’t be delayed without incurring technology debt: obsolescence can come back and bite.

Case Study: St. Luke’s Health System
CASE STUDY Industry

Source
Health Care
Apptio
• Hospital revenue • IT department began • Created a budget that

generation was below searching for cost cutting planned for maintaining
expectations during the opportunities. service levels while
previous fiscal year. exceeding budget
• Procured a Technology
• Large IT costs were Business Management constraints (3% reduction).
adversely affecting the Solution (Apptio) to assist • Performance against
bottom line. with identifying cost saving budget was outstanding:
• St. Luke’s Health System opportunities. 8% reduction in IT
implemented an across- • Identified excessive spending, resulting in $1
the-board budget freeze. spending on storage and million saved.
desktop software.
Targeted reduction of
these expenditures.

Finding cost savings: reduce budget through project deferral
If a secondary proposal must find cost savings, re-examine the viability of
projects.
Asset Management for Capital Budgeting Focus On
• Chances are that not every project that is budgeted for • Saying “no” is hard, but it is better than making
will launch and some projects that aren’t budgeted for promises and failing to deliver. When it comes down to
will launch. cutting projects, you may have to make tough decisions
• Get business units involved in the discussion. Often, that don’t please everybody.
rather than deferring a project, business units will agree • Focus on cutting the following projects:
to use their budget to fund the initiative.
o Projects that don’t have a quantifiable ROI.
• If projects must be cut and business units are unwilling
o Projects that are subject to a high degree of risk.
to fund them, openly discuss the merits of projects with
finance executives and business units. o Projects that are not highly aligned with corporate
• Try to come to consensus on project prioritization. objectives.
However, consensus is going to be difficult to achieve o Projects that are not prerequisites for other projects.
since business units requesting projects have o Projects focused on short-term rather than long-term
competing interests; they all want IT support or gains.
enablement.
o Projects that require significant capital investment.
Source: BCG (Grebe)
Deferred projects often represent a source of additional funding in practice. However, do not rely on
deferral to make the budget work. Sometimes, a large proportion of planned projects come to fruition.

Do your part to help the finance department manage cash flow
by matching IT expenditures to the business cycle
Cash is king, and all must serve the king. There are a number of things that
can be done to improve operating cash flows.
Extend your days payable:
• Negotiate with suppliers or third-party providers and extend payment terms. If negotiation does
not go well, consider switching suppliers to one who permits a longer payment period.
Avoid lump sum payments:
• Try to set up payment terms that allow regular monthly outflows instead of a large upfront
payment. Vendor financing options can help.
Reduce IT inventory:
• Reduce the number of spares kept on hand to improve cash flows. Generally, inventory
reductions will be achieved through a purchase freeze, not sale of existing assets. Spend wisely,
not more. Source: BCG (Grebe)
A business can run without profits for a short time, but it cannot run without cash. Consequently, managing
cash is a primary concern of finance. Improving IT’s cash use will demonstrate to finance that IT is concerned
about their objectives.

Practice and socialize presentation
3.2.2 1–2 Business days
INSTRUCTIONS
INPUT
1. Review the budget presentation you have created and ensure it • IT budget
communicates the story you want to tell. presentation
2. Practice delivering the presentation in a boardroom. OUTPUT

3. Enlist the participation of fellow employees to review the budget • A refined budget
presentation. Ask them to critique the content as well as delivery of presentation
the IT budget presentation. In particular, secure the participation of:
Materials
◦ CIO Direct Reports
◦ Trusted Advisors Presentation
• Projector
4. Receive feedback with an open mind and revise the budget
presentation if necessary. Participants
• CIO
• Direct Reports
• Trusted Advisors
No matter how good a story is, it won’t be well received unless

it is put together nicely – no errors, well formatted, and easy on
the eyes.

Tech analyst team.
Get feedback and revise

3.1.1 The budget will be reviewed by direct reports, business unit heads, key project
managers, and trusted advisors to identify any anomalies. The feedback will be used
to revise the budget if necessary.
Build IT budget presentation

The budget presentation will be created slide by slide. The charts generated by Info-
3.2.1 Tech’s IT Cost Forecasting Tool may be used to visually represent the budget. Info-
Tech’s IT Budget Presentation may also be used to communicate the value IT
delivers.

Practice and socialize presentation

3.2.2 The budget presentation will be reviewed to ensure it communicates the story IT
wants to tell. Direct reports and trusted advisors will be asked to critique the content
and delivery of the IT budget presentation.

Build your IT financial management capabilities
Building your capabilities can make budgeting easier and more successful
next year.
Does your organization have dedicated IT finance resources? Larger
organizations with mature IT financial management typically either have
dedicated finance resources within IT or employees working within the
People finance department that focus on IT. Consider hiring an IT finance
employee to assist not only with IT budgeting, but also with other areas of
IT finance such as costing.
Does your IT department feel a time crunch for budgeting? Radical,

technology-centered organizations have tried to push the business
planning that IT requires for budgeting forward in order to allow IT the time
Process they need for budgeting. Determine if this is an option. Also, developing
processes around tracking variance and maintaining the data needed for
budgeting can help.
Does your organization use Microsoft Excel to build budgets? Excel is

sufficient for most organizations, but more powerful tools do exist. IT
financial management and business technology management software
Technology typically includes a budgeting module. This software can improve the
accuracy of budgeting by using superior cost data to forecast costs.
Additionally, it can speed up the budgeting process through automation.
Source: Deloitte (Wensor)

Build IT financial management capabilities: people
Focus on improving your people; training and hiring with budgeting in mind
can make a big difference.
Develop Budgeting Skills

• Skill development will occur naturally through participation in the budgeting process; have new team
members participate in budgeting tasks they are unfamiliar with to help them gain an understanding of the process.
Additionally, include people who are likely to be in roles that necessitate budgeting in the future.
• Have team members read this blueprint.
• Consider formal training; courses are available.
• Book an Info-Tech IT budgeting management workshop.
Grow Resource Pool

• Hire an FTE who has significant budgeting and finance experience to oversee budgeting.
• Hire a consulting firm to assist with budgeting.
• Tap into the finance department’s resources and request assistance in completing the budget.
• If procuring financial management software, ask the vendors to help.
• Use Info-Tech consulting; we have a team that specializes in costing and budgeting.

Build IT financial management capabilities: process
Focus on improving your process; keeping records and tracking new data
can empower your budgeting capability.
Shrink the Launch Track Concerns Track Success Keep Detailed

Planning Gap Preliminary Talks From This Year From This Year Records
• Request that the • Implement a • Create a process • Track budget • Keep detailed
gap between process of having to track concerns presentation and records of budget-
business unit preliminary that arise during negotiation tactics cost variance; use
planning and IT discussions with your presentation. that worked well; this data to model
budgeting be business units to Note what you can make your forecasts for
extended. Even 2- get a general idea stakeholders were sure to reuse next year. Make
3 days can make of their strategy concerned about. these tactics. sure you keep this
a big difference. and initiatives Next year, you year’s budget and
prior to formalized can focus on budget
planning. these concerns. presentation.

Build IT financial management capabilities: technology
Focus on improving your technology; there is IT financial management

software that can forecast costs and assist with budgeting.
Benefits
• Cost model and forecasting methodology: provides suggested models to handle cost attribution and forecasting.
• Data collection assistance: integrate with existing systems to automate this function.
• Reporting and analytics: analyzes costing trends and identifies patterns.
Cost
Price Range:
$20,000 – $300,000
(Pricing varies depending on the selected vendor, the size of the organization, and the number of users.)

Research contributors and experts
Ken Russell, Partner

Fortium Partners
Ken brings nearly three decades of experience leading IT

organizations through times of disruptive change, primarily in
manufacturing and distribution industries in both wholesale and
retail markets.
Andre Robillard, Head of IT & Administration

Dairy Farmers of Ontario
Andre has extensive IT experience, including over 17

years in senior positions. Some of Andre’s key strengths
include IT strategy, IT governance and risk management,
project management, systems development, and IT
operations.

Bibliography
Alsdorf, Charles. "Federal CFO Insights Cost driven performance metrics." Deloitte Public Sector. Deloitte, 2015. Web. 19 Oct. 2016. <
https://www2.deloitte.com/content/dam/Deloitte/us/Documents/public-sector/us-fed-cost-driven-performance-metrics-05272015.PDF>.
APQC. “Financial Planning and Analysis.” Grant Thornton, 27 Mar. 2015,

www.grantthornton.com/issues/library/articles/advisory/2015/BAS-APQC-financial-planning-and-analysis.aspx.
“Automating IT Cost Transparency." Apptio, n.d. Web. 28 May 2014. <

http://info.apptio.com/resource-center_whitepaper_registration_Automating-IT-Cost-Transparency-Apptio.html>
Benton, Daniel. "IT TRANSFORMATION – Driving business innovation, execution and agility through process, technology and culture
change." Accenture Strategy. Accenture, 2015. Web. 19 Oct. 2016. <
https://www.accenture.com/t20160914T074333__w__/us-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/
Strategy_6/Accenture-ITT_Brochure_Page.pdf
>.
Berez, Steve, Rudy Puryear, and Vishy Padmanabhan. "IT: Digital's Achilles' Heel." Bain & Company. N.p. 11 Oct. 2016. Web. 11 Dec.
2016. <http://www.bain.com/publications/articles/it-digitals-achilles-heel.aspx>.
Best Practices for Better IT Budgeting. Rep. Apptio, n.d. Web. 12 July 2014. <
http://info.apptio.com/WebcastBestPracticesforBetterITBudgeting_WebinarLandingPage.html?mkt_tok=3RkMMJWWfF9wsRonsq%2FJ
ZKXonjHpfsX54%2B0pXq6wlMI%2F0ER3fOvrPUfGjI4CSsVgI%2BSLDwEYGJlv6SgFT7DMMaFwybgPWBE%3D
>
Bloch, Michael, Sven Blumberg, and Jurgen Laartz. "Delivering large-scale IT projects on time, on budget, and on value." McKinsey &
Company. N.p. Oct. 2012. Web. 11 Oct. 2016. <
http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/delivering-large-scale-it-projects-on-time-on-budget-and-on-v
alue
>.
Brinda, Mark and Michael Heric. "The Changing Face of Technology Buyers." Bain & Company. N.p. 9 July 2014. Web. 11 Dec. 2016. <
http://www.bain.com/publications/articles/the-changing-face-of-technology-buyers.aspx>.
“Budget for innovation: Case study - standardising Dell.” ComputerWeekly. N.p. 10 March 2010. Web. 19 Oct 2016 <
http://www.computerweekly.com/feature/Budget-for-innovation-Case-study-standardising-Dell>
Caldo, Giuliano, Matthias Hoene, and 'Tunde Olanrewaju. "How winning banks refocus their IT budgets for digital." McKinsey &
Bibliography
Callaghan, Shaun, Kyle Hawke, and Carey Mignerey. "Five myths (and realities) about zero-based budgeting." McKinsey & Company.
N.p. Oct. 2014. Web. 11 Oct. 2016. <
http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/five-myths-and-realities-about-zero-based-bud
geting
>.
Cichocki, Paul. "Radical redesign through zero-based budgeting." Bain & Company. N.p. 12 June 2012. Web. 11 Oct. 2016. <
http://www.bain.com/publications/articles/radical-redesign-through-zero-based-budgeting.aspx>.
Corneau, Bob. "CFO Insights Evaluating IT: A CFO’s perspective." Deloitte, 2014. Web. 19 Oct. 2016. <
https://www2.deloitte.com/content/dam/Deloitte/de/Documents/finance/us_cfo_insights_evaluatingIT_013014.pdf>.
Cornish, Nigel, Rudy Puryear, and Marc van der Vleugel. "The new CIO's quick-start manual." Bain & Company. N.p. 3 Apr. 2013. Web.
11 Oct. 2016. <http://www.bain.com/publications/articles/the-new-cios-quick-start-manual.aspx>.
Deck, Stewart. "Memo from the CFO: Strategies to Survive Budget Meetings." CIO, 01 Jan. 2001. Web. 19 Oct. 2016. <
http://www.cio.com/article/2442253/budget/memo-from-the-cfo--strategies-to-survive-budget-meetings.html>.
"Deloitte Australia CIO Survey 2014 CIOs: At the Tech-junction." Deloitte Australia. Deloitte, 2015. Web. 19 Oct. 2016. <
https://www2.deloitte.com/content/dam/Deloitte/au/Documents/risk/deloitte-au-risk-cio-survey-031615.pdf>.
Dreischmeier, Ralf, Christina Matzke, and Sesh Iyer. "Taking IT in Financial Institutions to the Next Level." BCG Perspectives. N.p. 25
Sept. 2012. Web. 19 Dec. 2016. <
https://www.bcgperspectives.com/content/articles/financial_institutions_it_strategy_ivis_it_capability_maturity_framework_taking_it_next
_level/
>.
Fallas, Emilia, Hernan Saenz, Peter Guarraia. "Sustained cost transformation: Delivering savings that stick." Bain & Company. N.p. 13
Jan. 2012. Web. 11 Oct. 2016. <http://www.bain.com/publications/articles/sustained-cost-transformation.aspx>.
Farrell, Diana, Terra Terwilliger, and Allen P. Webb. "Getting IT spending right this time." McKinsey & Company. N.p. May 2003. Web. 11
May 2016. <http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/getting-it-spending-right-this-time>.

Bibliography
Gail, Kelli. “Deutsche Bank and IBM Sign Outsourcing Contract.” IBM. N.d. Web. 19 Oct. 2016. <
https://www-03.ibm.com/press/us/en/pressrelease/386.wss>
“Global CIO: St. Luke's CIO Saves Millions With Apptio's Help.” Apptio, n.d. Web. 19 Oct 2016.
http://www.apptio.com/news/global-cio-st-lukes-cio-saves-millions-apptios-help>
Goldman, Neal, Jason Heinrich, and Sean O’Neill. "Cutting through the Complexity of Compliance." Bain & Company. N.p. 13 May
2015. Web. 11 Oct. 2016. <http://www.bain.com/publications/articles/cutting-through-the-complexity-of-compliance.aspx>.
Grebe, Michael, and Claudia Van Laak. "Optimizing the IT Budget for the Downturn―and Beyond." BCG Perspectives. N.p. 21 Sept.
2009. Web. 11 Oct. 2016. <
https://www.bcgperspectives.com/content/articles/information_technology_management_two_speed_economy_optimizing_the_it_budge
t/
>.
Grebe, Michael, Sabine Döschl, and Olivier Morbé. "Digitization and Simplification." BCG Perspectives. N.p. 02 Dec. 2014. Web. 19
Oct. 2016. <https://www.bcgperspectives.com/content/articles/it_performance_it_sourcing_digitization_simplification/>.
Heinrich, Jason, Eric Garton, and Brad Martin. "Betting on Zero-Based Budgeting's Trifecta." Bain & Company. N.p. 17 Oct. 2016. Web.
22 Oct. 2016. <http://www.bain.com/publications/articles/betting-on-zero-based-budgetings-trifecta.aspx>.
Hoene, Matthias. "Spend wisely, not more, on IT." McKinsey & Company. N.p. Jan. 2016. Web. 11 Oct. 2016. <
http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/spend-wisely-not-more-on-it>.
Hopson, Frank. "Why Continuous Improvement Beats Annual Budgeting." CFO. N.p. 24 Aug. 2016. Web. 19 Oct. 2016. <
http://ww2.cfo.com/budgeting/2016/08/continuous-improvement-beats-annual-budgeting/>.
“ACCENTURE: IT TRANSFORMATION." Client Case Study. Accenture, n.d. Web. 19 Oct. 2016. <
https://www.accenture.com/us-en/success-it-transformation-accenture-cio-summary>.
Kark, Khalid, and Karen Mazer. "Deloitte survey: CIOs across the globe say innovation and growth are top priorities for business."
Deloitte United States. N.p. 5 Nov. 2015. Web. 19 Dec. 2016. <
https://www2.deloitte.com/us/en/pages/about-deloitte/articles/press-releases/deloitte-2015-global-cio-survey-creating-legacy.html>.
Bibliography
Keiichi Aritomo, Driek Desmet, and Andy Holley. "More bank for your IT buck." McKinsey & Company. N.p. June 2014. Web. 11 Oct.
2016. <http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/more-bank-for-your-it-buck>.
Khan, Naufal, and Johnson Sikes. "IT under pressure: McKinsey Global Survey results." McKinsey & Company. N.p. Mar. 2014. Web.
11 Oct. 2016. <
http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/it-under-pressure-mckinsey-global-survey-results>.
MacNicholas, Michael, Ferenc Gyor, et al. “Deloitte CIO Survey Switzerland 2015: The legacy of the CIO." Deloitte Technology. Deloitte,
2015. Web. 19 Dec. 2016. <
https://www2.deloitte.com/content/dam/Deloitte/ch/Documents/technology/ch-en-technology-swiss-cio-survey-2015.pdf>.
Maddox, Teena. "Research: 66 percent of IT budgets increasing in 2016." ZDNet. N.p. 1 Oct. 2015. Web. 11 Oct. 2016. <
http://www.zdnet.com/article/research-66-percent-of-it-budgets-increasing-in-2016/>.
“Insights Management Tools – Zero-Based Budgeting." Bain & Company. N.p. 10 June 2015. Web. 11 Oct. 2016. <
http://www.bain.com/publications/articles/management-tools-zero-based-budgeting.aspx>.
McCann, David. “Budgeting Inflexibility Hamstrings Bottom Line.” CFO, 25 Aug. 2016.
McLellan, Charles. "IT budgets 2016: Surveys, software and services." ZDNet. N.p. 1 Oct. 2015. Web. 10 Oct. 2016. <
http://www.zdnet.com/article/it-budgets-2016-surveys-software-and-services/>.
Muller, Markus. "How I restructured Deutsche Telekom's IT." McKinsey Alumni Center. N.p. May 2014. Web. 11 Oct. 2016. <
https://alumni.mckinsey.com/public_content/500171213>.
"Operating Budgets vs. Capital Budgets for FMs." Facilities Management Building Systems Feature. FMLink, n.d. Web. 16 July 2014.
Padmanabhan, Vishy, and Will Poindexter. "Neglected, Indebted or Gold-Plated: Which Type of IT Do You Have?" Bain & Company.
N.p. 7 Oct. 2015. Web. 11 Oct. 2016. <
http://www.bain.com/publications/articles/neglected-indebted-or-goldplated-which-type-of-it-do-you-have.aspx>.

Bibliography
Ranger, Steve. "When it comes to IT budgets, bigger isn't always better." ZDNet. N.p. 1 Oct. 2015. Web. 11 Oct. 2016. <
http://www.zdnet.com/article/when-it-comes-to-it-budgets-bigger-isnt-always-better/>.
Ratzer, Peter, Daniel Weiss, Jens Weber, et al. "Dear CFO, why IT does matter within M&A transactions." Deloitte Technology M&A.
Deloitte, 2014. Web. 19 Oct. 2016. <
https://www2.deloitte.com/content/dam/Deloitte/de/Documents/mergers-acqisitions/IT-MA-Studie.pdf>.
Rigby, Darrell and Barbara Bilodeau. "Management Tools & Trends 2013." Bain & Company. N.p. 08 May 2013. Web. 11 Dec. 2016. <
http://www.bain.com/publications/articles/management-tools-and-trends-2013.aspx>.
Rigby, Darrell K. “Management Tools - Zero-Based Budgeting.” Bain & Company, 10 June 2015,
www.bain.com/publications/articles/management-tools-zero-based-budgeting.aspx.
Roberts, Roger. "A rising role for IT: McKinsey Global Survey results." McKinsey & Company. N.p. Dec. 2011. Web. 11 Oct. 2016. <
http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/a-rising-role-for-it-mckinsey-global-survey-results>.
Rogers, Paul. "Four Ways to Avoid Initiative Overload." Bain & Company. N.p. 14 Mar. 2016. Web. 11 Oct. 2016. <
http://www.bain.com/publications/articles/four-ways-to-avoid-initiative-overload-ameinfo.aspx>.
Ryan, Robert, and Tim Raducha-Grace. “IT Financial Management: The Business of IT." The IBM Press (n.d.): n.p. Web. 17 May 2014.
Schwedel, Andrew, et al. "Global Digital Insurance Benchmarking Report 2015 - Bain Brief." Bain Brief - Bain & Company. N.p. 15 July
2015. Web. 11 Dec. 2016. <http://www.bain.com/publications/articles/global-digital-insurance-benchmarking-report-2015.aspx>.
Shah, Baiju, and Brian Whipple. "CMO-CIO Alignment 2014." Accenture. N.p. n.d. Web. 19 Dec. 2016.
https://www.accenture.com/us-en/insight-cmo-cio-alignment-digital-summary
Technology Business Management. Rep. Apptio, n.d. Web. 16 July 2014.

http://info.apptio.com/rs/apptio/images/WP%20-%20Apptio%20TBM%20Book%20Chr%201.pdf?mkt_tok=3RkMMJWWfF9wsRokuKvJZ
KXonjHpfsX54%2B0pXq6wlMI%2F0ER3fOvrPUfGjI4FRMtmI%2BSLDwEYGJlv6SgFT7DMMaFwybgPWBE%3D

Bibliography
"The Payoff of IT Transformations." BCG Perspectives. N.p. 15 Oct. 2015. Web. 11 Dec. 2016. <
https://www.bcgperspectives.com/content/interviews/digital-economy-telecommunications-altintas-erdal-payoff-it-transformations/>.
Timmermans, Kris. “Zero-Based Budgeting: No Longer Just a Crisis Tool.” CFO, 28 Aug. 2015,
ww2.cfo.com/budgeting/2015/08/zero-based-budgeting-no-longer-just-crisis-tool/.
VMWare. "The IT Financial Management Challenge: Where Is the ROI?" (n.d.): n.p. Web. 14 May 2014.
<http://www.vmware.com/files/pdf/management/The_IT_Financial_Management_Challenge_Where_Is_the_ROI_.pdf>
Wegener, Rasmus. "Building IT Capabilities to Deliver Better Insights." Bain & Company. N.p. 10 Feb. 2016. Web. 11 Oct. 2016. <
http://www.bain.com/publications/articles/building-it-capabilities-to-deliver-better-insights.aspx>.
Wensor, Paul, Scott Taylor, and Matthew Pieroni. "Integrated Performance Management: Plan. Budget. Forecast." Deloitte Technology.
Deloitte, 2014. Web. 19 Oct. 2016. <
https://www2.deloitte.com/content/dam/Deloitte/au/Documents/technology/deloitte-au-tech-integrated-performance-management-plan-b
udget-forecast-0614.pdf
>.
Zimmermann, Ann. “ABN Amro Awards EDS With $1.3 Billion Contract.” The Wall Street Journal (WSJ), 26 Dec. 2002. Web. 11 Oct.
2016. <http://www.wsj.com/articles/SB1040733956514622153>
Zimmermann, Kim. “The Evolution of Budgeting and Forecasting.” CFO, 8 Oct. 2016,
http://ww2.cfo.com/accounting-tax/2016/10/budgeting-2/

Build An IT Budget: Effective IT Budgets Are More Than A Spreadsheet. They Tell A Story

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Build An IT Budget: Effective IT Budgets Are More Than A Spreadsheet. They Tell A Story

Uploaded by

Copyright:

Available Formats

V4

Cost information alone is not enough context for a business audience

The best recourse is to align investments with confirmed

Info-Tech Research Group 2

Complication • An IT budgeting process must contain

Info-Tech Research Group 3

This Research Will Also

Info-Tech Research Group 4

40% of CFOs describe their current financial planning

37% of CFOs said their organizations’ budgeting

of CFOs claim their staff was too busy with daily

Source: Grant Thornton, 2015

Info-Tech Research Group 5

Source: Info-Tech Research Group

Info-Tech Research Group 6

CIO Expectation CEO Expectation

Source: Info-Tech Research Group

Info-Tech Research Group 7

1st Maximizing stakeholder value

2nd Improving operational efficiency

3 rd Improving customer experience

Info-Tech Research Group 8

There is often inadequate time given to the budget

Info-Tech Research Group 9

Info-Tech Research Group 10

IT Department Enablement IT Financial Management

1 Budgetary approval can make or

Operational and Project Planning Faster Budget Approval

3 A solid budget proposal is a

Info-Tech Research Group 11

Info-Tech Research Group 12

1. IT cost pressure fueled by negative sentiment

3. Balancing transparency and complexity

4. Hidden cost drivers of IT

Info-Tech Research Group 13

1. Get budgetary approval

2. Forecast operational costs

3. Forecast capital costs

4. Complete a financial budget

5. Give a compelling budget presentation

Info-Tech Research Group 14

Info-Tech Research Group 15

Diagnostics and consistent frameworks used throughout all four options

Info-Tech Research Group 16

1. Plan 2. Build 3. Sell

Info-Tech Research Group 17

Workshop Day 1 Workshop Day 2 Workshop Day 3 Workshop Day 4

1.3 Setting Targets and Corporate Goals Stakeholders Objection Handling

• KPIs selected and • IT Budgeting Interview • IT Cost Forecast • IT Budget Presentation

Info-Tech Research Group 18

Guided Implementation 1: Plan

Start with an analyst kick-off call:

Then complete these activities…

With these tools & templates:

Info-Tech Research Group 20

1.1 1.2 2.1 2.2 3.1 3.2

Outcomes of this step

• Presell ideas; get support for IT initiatives.

Info-Tech Research Group 21

What this means for IT budgeting:

The new ESB will integrate key

Info-Tech Research Group 22

We’re thinking of investing in technology that