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IT Budget FY2024
Executive Presentation

Acme Products
Date: November 1, 2023
Table of
contents
3 Summary

6 Retrospective

19 FY2024 Budget: Overview

28 FY2024 Budget: By Category

35 Next Steps
Summary
Assumptions and high-level targets for the proposed FY2024
IT budget
Key assumptions behind the proposed budget
Summary of targets for FY2024
Assumptions for FY2024 proposed IT budget
The following are key business factors considered in drafting the proposed budget.

Factor Assessment Rationale Considerations

Global recession appears imminent. Affects will be felt by the Need to examine how to flexibly activate moderate reductions
State of economy Slowdown
organization indirectly in the mid-term. at short notice.

Sales and supporting IT services will not be touched by

Primary organizational Revenues are a priority to minimize impact of
Generate profit potential cuts -- investment may actually accelerate. Will need
objective slowdown/recession.
to look elsewhere for cost reduction oppportunities.

Review modernization initiatives and downscale scope to both

Keep the lights on - Shore up and resolve any outstanding performance issues to
Primary IT objective fasttrack most critical priorities and also reduce near-term
operational excellence ensure system stability and current levels of performance.
costs.

The most prudent approach is to balance inflation-driven

Current inflation rates will make what we keep signficantly more
IT budget impact Same increases with offsetting cuts to arrive at a 0% change in the IT
expensive next fiscal year, so decrease not possible.
budget.
Targets for FY2024 proposed IT budget
Summary of initial and proposed targets in developing the IT budget.
Last Fiscal to Next
Last Fiscal Year Next Fiscal Year Last Fiscal to Next Next Fiscal Year
Metric Fiscal Proposed Rationale
Actual Values Target Value Fiscal Target Variance Proposed Value
Variance
Overall net
Overall actuals $19,800,220.00 $19,600,000.00 -1.0% $19,571,400.42 -1.2%
project Cap
Inflation, ve
Non-project OpEx actuals $12,606,323.25 $13,100,000.00 3.9% $13,095,374.56 3.9% will drive inc
series of pla
A large volu
Non-project CapEx actuals $2,464,136.00 $1,200,000.00 -51.3% $1,180,494.85 -52.1% reaching the
retired and
Several larg
Project CapEx actuals $4,729,760.75 $5,300,000.00 12.1% $5,295,531.00 12.0% commitmen
capital proje

Summary of rationales:
• Overall net decrease projected due to large reduction in non-project CapEx.
• Inflation and vendor/workforce price increases will grow OpEx by over 3%. Offsets planned via software consolidations and retirements.
• A large volume of software and infrastructure capital assets are reaching the end of their depreciation lifecycles. Many will be retired and replaced with
cloud-based OpEx solutions.
• Several large-sale capital projects in progress or in commitment. Also plan to capture all employee capital project work as CapEx.
Retrospective
An overview of the previous fiscal years’
performance
Last fiscal year budgeted vs. actuals
Expenditure by type
Top vendors
Drivers of expenditure and efficiencies
Major capital projects advanced and completed
Last fiscal year in detail
Expenditure trends for the past five years
Last fiscal year budgeted vs. actuals
Actual expenditure exceeded the projected budget by $792,010 (4.17%).

Causes of variance:
• Unanticipated business hires required unbudgeted purchase of
laptops/equipment and software licenses.
• Acceleration of ERP selection project incurred additional consulting
fees originally planned for next fiscal year.
• Requirement to extend disaster recovery failover storage solution as
per audit findings.
• Discovery of several unsanctioned cloud apps – now reconciled and
costs will not reoccur.
• Continuing impact of changes to corporate work-from-home
policies.

Steps have been taken to mitigate previously unplanned costs relating to headcount increases and
shadow IT in the future.
Last fiscal year by expenditure type
While CapEx is variable year to year, our guidelines are to have CapEx fall in the range of 25%-30% of
total IT expenditure each year.

IT CapEx includes two main types of expenditure:

• Capital projects – All hardware, software, and workforce expenditure
to implement project outcomes through to the end of the fiscal year
in which the project was completed. In the years following
implementation, capital project costs are either depreciated over the
lifecycle of the assets acquired/created, or transitioned to OpEx for
managing, maintaining, and supporting the asset.
• “Business as usual” assets – Purchase cost of hardware and on-
premises software licences to support end users (e.g. laptops, ERP
licenses) and to maintain network and data center performance (e.g.
routers, servers).

The majority of CapEx is driven by capital projects, followed by previous-years’ depreciation

amounts and on-premises end-user hardware/software costs.
 Top 20 vendors of last Vendor
Last Year's Total Last Year's % of Total
fiscal year Vendor Expenditure Vendor Expenditure

Advanced Acme $2,600,300.00 20.44%

EverythingDesktop $1,255,613.00 9.87%
• The top 20 vendors comprised 91.45% of total ConsultingPro $1,050,000.00 8.26%
vendor spend. TotalCRM 5 $826,745.00 6.50%
• The top 10 vendors comprised 76.86% of total Supertel $727,350.00 5.72%
vendor spend. LinePro Ltd. $715,320.00 5.72%
KnowAll Consulting $645,000.00 5.07%
• Advanced Acme is, and will continue to be, our HR123 $614,308.00 4.83%
highest expenditure vendor for some time to KickCo $499,315.00 3.93%
come. Superior SFA Ltd. $455,423.00 3.58%
ABC ToGo $386,702.00 3.04%
Vaulted $374,027.00 2.94%
MegaConsole $359,950.00 2.83%
BrickWall Security $290,990.00 2.29%
StreamlineX $174,000.00 1.37%
RockBox $150,469.00 1.18%
CalmLake $110,333.00 0.87%
StrongSafe $108,268.00 0.85%
Cr8tiveSpace $103,886.00 0.82%
WidgetBuilder $93,522.00 0.74%
Major drivers of expenditure
Event
COVID-19 pandemic
Ransomware attack
Flooding event
Acquisition of salesforce
automation platform
Unanticipated business hires
Acceleration of ERP selection
project
Production network
reconfiguration
Financial Impact Last
Areas of IT Impact Magnitude of Impact Current Status
Fiscal Year
Staff 100% laptop-based - desktops eliminated. Increased Large $645,020.00 Resolved - permanent impact
volume of service desk tickets. Investment in
communication/collaboration techology.Increased IT staff
illness/loss.
Occurred in May. Caused business and service disruption Large $825,000.00 Resolved - temporary impact
for 24 hours as key data was inaccessible. Paid ransom to
restore data. Triggered additional security measures.
Occurred in September due to non-local hurricane. Small $235,000.00 Resolved - temporary impact
Required emergency activiation of some disaster recovery
protocols.
Previously unknown to IT and not accounted for in budget. Large $1,203,450.00 Ongoing
Required reallocation of IT applications and infrastructure
staff to implement plus purchase costs of software and
upgrade of some end-user devices and network
components.
A number of unancipated hires were made in the business. Small $120,458.00 Resolved - temporary impact
The costs of equipping these hires with laptops, licenses,
and other items were not accounted for in the budget .
Decision made to move project forward, resulting in Moderate $893,000.00 Ongoing
accrual of consultant costs last fiscal year originally
planned for next fiscal year.
Production network reconfiguration required due to Moderate $315,000.00 Resolved - temporary impact
changes in assembly workflow. Not accounted for in
budget.
Major drivers of efficiencies and savings
Financial Impact Last
Event Areas of IT Impact Magnitude of Impact Current Status
Fiscal Year
Discovery of shadow applications Unknown costs were being incurred. These applications Small -$113,400.00 Resolved - temporary impact
were discovered and discontinued. Fees are no longer
being paid.
Deferral of data analytics project Project initiation pushed to next fiscal year. Small -$75,000.00 Ongoing

Deferral of several business Business decision to delay initiation until next fiscal year. Large -$700,200.00 Ongoing
innovation projects

Deferral of several IT operations These included a cost-optimizaiton project, initiation of a Small -$140,000.00 Ongoing
projects formal IT training program, and a service catalog project.

Integration of PR and Marketing Allows for some software and systems consolidations. Small -$80,000.00 Resolved - permanent impact
Major capital projects advanced and completed

Project Name/Number Activities Expenditure Last Year Expenditure To-Date Status

Production platform Large-scale modernization of the production management $1,785,100.00 $2,145,995.00 Completed
modernization (#31003) system. Completed core of implementation, integration and
customization. Fully live.
Web redesign (#32976) Tying in of new features to live production system. $238,010.00 $727,320.00 Completed

Security upgrade (#33290)
Data Center Environmental
Control Upgrade (#32165)
Upgraded several security appliances in response to $108,234.00 $108,234.00 Completed
ransomware attack. Separate security hardening project
planned for next fiscal.
Selected and installed core environmental control system. $195,666.00 $195,666.00 In Progress
Currently in testing and reconfiguration.

Salesforce Automation (#32988) Purchased and integrated system. Made end-user device $1,203,450.00 $1,203,450.00 In Progress
upgrades and network configurations. Currently making
customizations and adjustments to align with process.
IT PPM (#33111) Identified/selected PPM platform via RFP process. $11,880.00 $11,880.00 In Progress
Currently planning for purchasing and set-up.
Last fiscal year budgeted vs. actuals: Expenses

Offset by decrease in contractor

actuals.

Unanticipated hires in the

business (laptops).

Unanticipated hires in the

business (licenses).

Discovered unsanctioned cloud

software.

ERP selection project

acceleration.

T.
Last fiscal year budgeted vs. actuals: IT services
Hired senior developer, built
interface to SFA.

Unplanned SFA solution

purchase.

Extended server lifespan.

Unanticipated new-hire
hardware and related service
desk support.

Deferred some expansion

project elements.

Mitigated ransomware attack.

Deferred IT service catalog

project.
Last fiscal year budgeted vs. actuals: Business

For most business units, variance between

budgeted and actual IT expenditure was
negligible.

Unplanned SFA solution

purchase.

Efficiencies from PR/

Marketing integration.

Unplanned reconfiguration of
Production network.

Right-sizing of new business

unit support requirements.
Last fiscal year budgeted vs. actuals: Innovation

Unanticipated security and business

continuity works – ransomware, disaster
continuity failover storage, maintenance of
service levels given new hires.

Negligible variance – unanticipated new hire costs

offset by deferral of several operational
enhancement projects.

Deferral of several innovation and strategic

IT maturation projects.
Previous five years: Actuals
and variance

In general, IT expenditure has increased over the past five

years (with the exception of FY2020). Primary drivers of
increase over this timeframe include:
• Security – 280% expenditure increase.
• Data & BI – 937% expenditure increase.
• Growth initiatives, including:
o Increase in employee headcount – 20%.
o Introduction of new business unit last year – net-
new service and support costs.
IT expenditure as a percent of organizational revenue has
remained in the 3.28-3.80% range.
Previous five years: IT expenditure per FTE

Expenditure has risen in recent years due to large IT investments in key business units, but is now
decelerating as benefits are realized.
FY2024 Budget:
Overview
High-level view of the budget in context.
• Alternative scenarios
• Proposed budget in historical context
• Proposed budget by expenditure type
• Capital projects
Alternative scenarios considered
All scenarios are based on increase/decrease over last fiscal year and assume the following non-negotiables: Basic business continuity,
continued security and data protection, legal and regulatory compliance, and vendor discontinuation of on-premises offerings (i.e. cloud
only).

Scenario 1: High growth Scenario 2: Stability Scenario 3: Austerity

Economic prospects – very positive
• Accelerate modernization and data
analytics initiatives.
• Acquire enterprise/data architecture
capabilities in house.
• Move aggressively to cloud and reduce
on-premises infrastructure.
Estimated cost:
≈$23 M (15.9% increase)
Economic prospects – positive
• Continue modernization and business
resilience projects.
• Strengthen project governance and right-
size service levels.
• Continue steady move to cloud software
and reduce need for in-house commodity
skills.
Estimated cost:
≈$19.6 M (1.16% decrease)
Economic prospects – negative
• Limit or stop select new capital projects
and other new expenditure.
• Halt modernization initiative and extend
lifespan of on-premises assets where
possible.
• Seek to reduce service levels and
associated IT headcount.
Estimated cost:
≈ $17.8 (10% decrease)

IT is recommending Scenario 2 as it best reflects current economic conditions and introduces the least business
risk.
Last year’s actuals vs. next year’s proposed
We aim to achieve a slight decrease in overall IT expenditure for FY2024.

Areas of notable increase/investment

• Employees – offset by equal reduction in contractors
• Cloud software and application maintenance
• Outsourced infrastructure managed services
• Security
Areas of notable decrease/efficiency
• On-premises hardware and software
Overall
decrease • Consultants
of 1.16% • Growth-related initiatives
• Basic “keeping the lights on” activities
Next year’s proposed budget in a five-year historical context

Overall, we’re seeing the positive effects of post-COVID normalization.

With an organizational
revenue target of $525,000,00
for next fiscal year, this puts
the proposed IT budget at
3.7% of organizational
revenue, the lowest
percentage since FY2021.
Proposed distribution across CapEx and OpEx
Our steady move to the cloud is creating positive offsets across non-project spend.

Inflation, vendor price increases, new hires in the business to be supported, dramatically higher
market rates for IT skill sets, and our increased use of outsourced solutions like cloud software
are driving increases.

Net-new projects plus re-

initiation of last year’s deferred
Several on-premises capital hardware and software assets projects.
have reached end of life. Their depreciation amounts are
fully applied, and they’re not being replaced with new on-
premises capital solutions.
Proposed budget’s impact on spend per FTE
IT expenditure per FTE is expected to decline for the first time since FY2020.

This positive decline in per-FTE

expenditure is due to ongoing efforts to
rationalize, consolidate, and retire
software applications that feature
redundant and out-of-date functionality
and move to cloud-based options that
reduce in-house infrastructure and
staffing requirements.
Project: ERP upgrade Project #: 35972
Status: Committed
FY2024 Cost: $2,820,332

Description: Projected costs:

Migrate current on-premises ERP solution to cloud Phase Activities Timeframe Projected cost
version with the same vendor. Functionality will be Detailed planning Requirements, workflow impact Jan-Mar 2024 $353,000 (CapEx)
extended in order to retire/eliminate ancillary standalone (FY2024) assessment, migration planning.
business applications in Finance and across supply chain Customization Cloud solution tuning to match our Apr-Aug 2024 $1,132,350 (CapEx)
functions. (FY2024) workflows, data models, and reporting.
Data migration Mirror/migrate data into cloud platform Sep-Nov 2024 $870,220 (CapEx)
Business goals and benefits: (FY2024) and validate.
• Increase real-time supply chain visibility. Initiation Start rollout/training. Additional tuning. Nov-Dec 2024, $464,762 (CapEx)
(FY2024/FY2025) Decommissioning of old solutions. Jan-Dec 2025 $681,000 (CapEx)
• Integrate and centralize data and information sources.
Long-term support Monthly SaaS licensing/maintenance fees, Jan 2026 to Dec $1,965,000 (OpEx)
• Improve accuracy of supply/demand forecasting. (FY2026-FY2027) house-side app/vendor management, IT 2027
service desk support, new hire training.

Key stakeholders/beneficiaries: Executive Sponsor: Estimated ROI:

• Sales – VP, Directors Pat Smith, VP of Sales Year 1-2 (2024-25) = $0
• Finance – CFO Project Manager: Year 3 (2026) = $105,000 (-$2,720,332)
• Production – VP, Managers Year 4-6 (2027-29) = $1,939,500 (-$780,832)
Taylor Kim, IT PM (Applications)
Year 7 (2030) = $810,600 (+$29,468)
Project: Select and implement a business data Project #: 36042
Status: Committed
visualization platform FY2024 Cost: $302,950

Description: Projected costs:

Select a software tool to allow business users to Phase Activities Timeframe Projected Cost
independently and quickly extract meaningful data sets, Platform Requirements collection, Jan-Apr 2024 $75,000 (CapEx)
develop visual reports, and analyze findings to improve selection/acquisition tendering, vendor evaluation, contracting.
decision making, specifically in the areas of (FY2024)
supply/demand management. Platform Hardware/network impact reconciliation, May-Dec 2024 $215,000 (CapEx)
initiation/rollout security review, cloud service set-up,
Business goals and benefits: (FY2024) systems/data migration/integration,
customization, testing, rollout training
• Enable business users to self-serve on data requests. (users and IT support).

• Enhance data visibility, transparency, and timeliness. Long-term support Monthly SaaS licensing/maintenance fees, Jan 2025 to Dec $295,000 (OpEx)
(FY2025-FY2028) house-side app/vendor management, IT 2028
• Improve accuracy of supply/demand forecasting. service desk support, new hire training.

Key stakeholders/beneficiaries: Executive Sponsor: Estimated ROI:

• Sales – VP, Directors Pat Smith, VP of Sales Year 1 = $0
• Finance – CFO Project Manager: Year 2 = $190,000 (-$390,000)
• Production – VP, Managers Year 3 = $260,000 (-$130,000)
Erasmus Cole, IT PM (Applications)
Year 4 = $300,000 (+$170,000)
Other major capital projects for next fiscal year

Target FY2024 Accrued costs

Project name Project # Project status
completion forecasted costs to end of FY2023
Data Center Environmental Control Upgrade 32165 In progress Jun 2024 $54,880 $37,871
Salesforce Automation 32998 In progress Oct 2024 $307,300 $1,344,119
IT PPM 33111 In progress Apr 2024 $82,167 $10,505
Network Performance Monitoring Outsourcing 36018 Committed Apr 2024 $102,200 $0
Marketing Campaign Automation 36026 Committed May 2024 $66,370 $0
Shipping System Networking 36333 Committed Nov 2024 $83,644 $0
Ransomware Hardening 36412 Committed Dec 2024 $481,550 $0
FY2024 Budget:
By Category
Proposed budget by asset, service, business unit, and business
focus category.

• Workforce and Vendors

• IT Services
• Business Units
• IT Operations, Business Growth, and Business Innovation
Relative allocation of workforce/vendor costs
Permanent employee costs will increase by 8.65%. This
is needed to ensure we can support last year’s and next
year’s growth and strategic initiatives now that
temporary use of consultants and contractors has ended
for some projects.
New expenditure for on-premises
infrastructure hardware has virtually
disappeared from the budget due to our
moves to cloud services.
Cloud software costs will increase notably next
year, largely driven by our transition of
Advanced Acme from an old on-premises
version to a new cloud version. This increase is
offset by a reduction in on-premises software
costs.
Managed services costs are projected to
increase as we outsource some IT
infrastructure and security monitoring
services next year.
Top 20 proposed Vendor
Next Year's
Proposed Total
Next Year's
Proposed % of Total
vendors for next fiscal Vendor Expenditure Vendor Expenditure

year Advanced Acme

EverythingDesktop
$2,760,400.00
$1,260,540.00
22.08%
10.09%
TotalCRM 5 $850,309.00 6.80%
The top 20 vendors comprise 88.24% of total vendor Supertel $787,210.00 6.30%
expenditure, while the top 10 comprise 74.71%. LinePro Ltd. $702,128.00 5.62%
• Superior SFA Ltd. $645,110.00 5.16%
Advanced Acme is our leading vendor, with
EverythingDesktop a somewhat distant second. HR123 $629,207.00 5.03%
BRC Ltd. $565,000.00 4.52%
• New entrants on the list for next year include BRC ABC ToGo $400,512.00 3.20%
Ltd. (consulting) and SmartBlock Security (security Vaulted $400,350.00 3.20%
management outsourcer). SmartBlock Security $336,700.00 2.69%
• Vendors that have exited the top 20 list include: ConsultingPro $318,400.00 2.55%
MegaConsole $298,400.00 2.39%
• BrickWall Security – To be replaced by StreamlineX $174,000.00 1.39%
SmartBlock Security. Insight Pro $163,575.00 1.31%
• KickCo – Reduction in hardware expenditure due KnowAll Consulting $146,790.00 1.17%
to infrastructure outsourcing to cloud. CalmLake $138,090.00 1.10%
RockBox $130,520.00 1.04%
• CountUp – Functionality to be replaced by
StrongSafe $113,490.00 0.91%
Advanced Acme platform module.
Cr8tiveSpace $112,903.00 0.90%
Relative allocation of on-premises vs. cloud
Our proposed budget plans to spend twice as much on subscription-based cloud software and hardware solutions than on-
premises assets.

Cloud costs will increase, and on-

premises costs decrease, over time.

Cloud solutions aren’t owned assets. They Some new cloud solutions will incur project-
aren’t CapEx and will not be depreciated. related CapEx costs during set-up. All costs will
move to OpEx after project completion.
Relative Allocation Across Core IT Services

Maintaining business applications has historically been the IT service with the highest costs. Project CapEx will be
significantly higher this year due to several proposed cloud migration projects.

Hosting and network
infrastructure costs will
be over 50% lower next
year via elimination of
on-premises assets.
Our investment in data Security will see a 40% IT management costs are low.
and business increase in costs, with a There are longer-term plans to
intelligence solutions is focus on protecting mature IT’s management
planned to increase by ourselves against capabilities, starting with project
over 90%. ransomware. management.
Relative allocation across core business units

The IT department’s overall Our Sales & Customer Service division is the largest consumer of IT resources
internal costs will drop by across all three expenditure types. Costs for its IT allocation will increase an
nearly 30% this year across additional 7.61% next year, largely in the area of Project CapEx due to strategic
all three expenditure types. technology initiatives.

Our Logistics, Industry Partnership, and Design units

Finance’s costs will
have historically operated somewhat independently of
increase by 37.25%
IT in their use of technology. Efforts are underway to
given needed upgrades to
gain better alignment.
functionality.
Relative allocation across business focus areas

The largest expenditure type is dominated by non-

project OpEx due to increased adopt of cloud and
other outsourced solutions.
The proposed budget for business growth has
dropped significantly from last year mainly due
to a large drop in depreciation and non-project
CapEx due to asset end-of-life.
While it has increased by nearly
70% from last fiscal year, the
proposed budget for business
innovation remains low in
comparison to other expenditure
types.
Next Steps
Finalizing the proposed IT budget
• Questions and discussion
• Finalization, approval, and submission
Questions?
Actions

1. Address any issues raised and update budget.

2. Present budget for final approval.
3. Submit budget to Finance.

More detailed data about IT’s proposed budget is available. If you have
any additional thoughts or would like to have a more in-depth
conversation with us, please reach out.