It’s not easy to build an IT budget that is both accurate and agile.
Between all the different vendor contract terms, pricing structures, support expiration dates, license renewals, hardware upgrades, and infrastructure changes, it’s hard enough to not overlook a key investment – and that’s just the beginning!
Over our three decades in the IT service industry we’ve heard from a lot of executives who will painstakingly craft their budgets only to find themselves surprised by their actual spend. What we’ve found is that an oversight is indeed to blame, but at a much higher level than individual line items.
Most commonly, inaccurate budgets fail to account for:
- Internal changes
- External changes
- Support needs
- The unexpected
- Ongoing revisions
We’ll spend some time taking you through each of these elements below.
1 – Internal Changes
Oftentimes budgets are recycled from one year to the next. This is perfectly fine as a starting point, but trouble arises when we consider a budget “finished” after copying and pasting the exact same spreadsheet. By doing that, we aren’t factoring in the organization’s current:
- Financial state – Are you where you expected to be at the end of the 2023 fiscal year? Has your overall revenue changed? As a rule of thumb, smaller organizations should plan to invest 7% of revenue on IT (including cybersecurity, which on average takes up about 17% of overall IT budgets).
- Strategic priorities/goals – Are you planning to grow? Change or enhance the value you’re offering to clients/members? Consolidate offices?
- Return to Office (RTO) plans – Are you considering this? If so, what is the impact (e.g. age of equipment in the office, snacks, coffee, paper, copier usage)?
2 – External Changes
Recycling budgets also assumes no external changes, such as:
- Cost Increases – Whether it’s the result of inflation or standard annual increases, costs may likely change for subscription licensing, hardware, and service contracts like MSP, raises for internal staff
- Taxes and interest rates – How have these changed from the previous year?
- Economic health – What’s the expected impact of economic trends on your industry? On the spending habits of those who pay for your services?
According to Gartner, IT spending will likely grow by 8.6% in 2024.
3 – Support Needs
Now that you’ve thought through how internal and external changes will affect your organization, consider how your current IT support model aligns with that landscape. The two main factors that will affect your budget are whether you have:
- The right competencies – Are the staff and vendor partners you have in place today going to have the technical and/or strategic know-how to get you through the goals you have set out for the year? Will you need to augment with training? With outsourcing?
- The right resources – Do they have all the tools they’ll need at their disposal to navigate those same circumstances? The time?
4 – The Unexpected
Or even the “unprecedented” as we saw just a few years ago. Besides events as large-scale as a global pandemic (which is clearly not outside the realm of possibility), have you built out worst-case, expected, and best-case scenarios that account for possibilities like:
- A security incident – The average cost of a successful breach is $4.45MM.
- Staff turnover – What happens if the person with the “keys to your kingdom” quits or falls ill?
- Cash influx – If you get a surge in revenue, is there an IT investment you could make that would accelerate a strategic goal?
5 – Ongoing Review
Lastly, a lack of ongoing review and revision can lead to snowball effects, or ever-widening gaps between your budgeted and actual spends. We recommend reviews each quarter at minimum to check for:
- Ripple effects from “the unexpected”
- COVID and the lingering impact of remote and hybrid work and client/member engagement
- Long-term remediation efforts from a security incident (response, new defenses and policies and training, maybe a new service provider…).
- Switching from an in-house to outsourced model and having some costs absorbed by their service contract.
- Advancements to incorporate – Such as relevant AI tools going mainstream.
- Mistakes to correct – Errors, typos, or oversights that you can catch after 1 quarter versus 1 year.
Feeling overwhelmed at the prospect of taking all these factors into consideration for your 2024 IT budget? Our CIO team has helped many organizations craft accurate and agile budgets that actively support their overall business goals. Learn more about our consulting services—and reach out!—here.