Set Your IT Budget for the New Year

IT departments set a budget each New Year like clockwork. The IT budget template is in front of you, but how do you fill it out to secure the budget you need? Based on the most recent survey results, there are a few things you’ll want to keep in mind when you pitch the 2019 IT Budget.

2019 Is Looking To Be A Good Year For IT Departments

The most recent survey for projected IT spending from Tech Pro Research reported that businesses intend to allocate more funds to IT for 2019. SMBs expect to increase their IT budget anywhere between 1-10 percent.

The Usual Suspects

The largest segment of IT to receive financial attention is security, which was identified by 63 percent of respondents as concern number one. Cloud services was named as a key segment by 48 percent of respondents.

If your company is one of the businesses looking to implement secure cloud storage for your data, then have a talk with one of our Advance2000 Account Managers. Private cloud storage has been our thing for a few decades and we can absolutely help with this initiative.

Out of Left Field

Believe it or not, internal employee training was a high IT priority for 44 percent of respondents.

Melanie Wolkoff Wachsman broke down the allocation of IT budget towards employee training in her analysis of the most recent research results. She pointed out that not only does successfully onboarding new employees require dedicated training processes, but current employees also need regular re-training on changing technologies and updated work processes. The easiest way to disseminate information about changes in product/service offerings, company culture, and industry updates across SMB and Enterprise businesses is via learning management software, so that technology is finding its way into more approved IT budgets.

(R)Evolving Decision Makers

The survey also revealed that key IT decision makers are shifting. Rather than all IT spending being determined in the IT department, end business areas are gaining control over IT decisions. From 2018 to 2019 the IT key influencers in tech purchases has shifted down from 48 percent to 42 percent. Now it is more important than ever for IT and end users to maintain open dialog and collaborate on tech evaluations and buying decisions.

These answers are probably a mix of what you expected to see and maybe a little of what you didn’t expect. Now that we have an idea of what 2019 IT business trends may look like, how can you most effectively secure the right IT budget for the New Year? Below are some key factors you’ll want to keep in mind and act upon as you plan.

Setting Your 2019 IT Budget

Set IT Strategy Expectations

Before you begin to fill in the IT budget template, have conversations with other key business stakeholders. Discuss the IT strategy you envision for the next 3-5 years and how it aligns with the business’s goals. Sell your budget before you even deliver it.

Presenting the strategy to the CEO, CFO, and others before presenting the budget gives them an opportunity to buy into your vision and agree (or disagree) that the plan will benefit the business for the next so-many-years. Even a massive IT project will be hard to dismiss when stakeholders previously agreed that its purpose, impact, and objectives will benefit the company.

Fostering communication across departments also ensures key components are kept within the plan. Now others hold some accountability to the approved plan and need to help make it work. As Patrick Gray from TechRepublic puts it, “it’s harder to simply dismiss budgetary categories or demand arbitrary reductions since there should be a direct tie between the previously agreed strategic imperative and the budget item.” Also, engaging early with other business stakeholders gives you the expert influence among the other key decision makers when it comes to approving IT expenses.

The 1 Page Strategic Plan

Your IT strategy already has buy in because of the early dialog with stakeholders. Use the IT budget to re-establish that buy in. When creating a killer IT budget, Mary Shaklett says to remind readers why the funds are needed and how they’re going to benefit the company. A one-page budget overview should describe the long term direction for the IT assets you wish the company acquire. Don’t include IT jargon here; that way it’s easy for everyone to read and comprehend.

Prioritize the Expenses

A budget should have four overarching categories: Staff, Hardware Leases/Updates, Software Subscriptions/Licenses, and Project Expenses. Each of these will have subcategories, but at the most basic layout, this is what the department budget needs to orbit. For a precise breakdown of items to consider for a budget, see our existing article IT Planning and Budgeting for 2017. While this article is specific for 2019 trends, our 2017 publication is evergreen.

Monitor Spending Against Last Year’s Budget

Compare the department’s actual spending against the budget from last year. This will reveal areas that cost more than expected, so you can adjust it now so as to not come in over budget.

It will also expose some expenses that need re-evaluation. Often there are valuable dollars wasted towards subscriptions and licenses not being used or underutilized. Running an audit on the current tech can reveal outdated processes, redundancies, and bottlenecks that you can either quickly address or attack in the New Year. Cutting expenses in one underused area and spending them on another only demonstrates your fiscal responsibility and that you merit that extra 1-10 percent of additional IT funding when it’s requested.

Don’t Just Cut Costs

Trimming the fat is good, but don’t let other departments think entire tech systems can go. Completely cutting back on technological investments is often counterproductive to companies’ goals. The right software and integrations can generally improve business profitability in the short- to medium-term.

James Kaplan, Johnson Sikes, and Roger Roberts from McKinsey reported that “when business and IT executives jointly take an end-to-end look at business processes, the resulting investments can have up to ten times the impact of traditional IT cost reduction efforts.” With revolving purchasing decision makers, companies will be expecting to see fast recoups on cost-of-ownership on technology. Make certain the metrics of your IT expenses measure the cost-to-revenue ratio, address strategic value, and highlight the competitive edge.

Highlight the IT Value Proposition

Keep tabs on the value IT adds to the business. When creating the budget, Shaklett says keep operating expenses (OPEX) and longer-term capital expenses (CAPEX) separate and include justification of each. Keep/include documentation for the ROI on expenses since businesses are expecting vendors to deliver more rapid ROI than in the past (here’s an article we published a while ago to help calculate cloud migration ROI, and it should come in handy here). IT strategy components are then easy to identify, understand, and adjust.

Establish a Schedule

While tackling projects at the beginning of the year feels like department progress, avoid front-loading your budget all in the first quarter. That massive project you want to roll out? Shaklett recommends waiting until the third quarter, or even the fourth quarter, to deploy. This depends on the business, of course. If you’re a retailer and your IT infrastructure needs to be ready to handle the strain of holiday shopping, earlier is better. If you’re not tied to end-of-year shopping madness, it might be more conducive to schedule large scale IT projects during the time when business has traditionally slowed.

Planning a timeframe and budget for IT projects can be overwhelming. To help simplify the process, our own technology design and IT expert, Joseph Talamantez, published this article on How To Plan a Successful VDI Implementation. While it’s specific to Virtual Desktops, the process works for a variety of projects.

Turn In Your 2019 Budget with Confidence

Now you know the key pieces to focus on while creating your 2019 IT budget.

  1. Prioritize communicating your IT strategy with other key business stakeholders early (and often) before you turn in your 2019 IT budget.
  2. Reiterate the value proposition of the IT assets you’re requesting with a short, one page IT strategy cover page.
  3. Prioritize your expenses and audit last year’s budget against 2018’s spending.
  4. Cut the fat where it needs to be trimmed, but don’t undersell the value technology provides to the business, and don’t be afraid to ask for exactly what you need to deliver the best ROI.
  5. Provide a working IT project schedule that best serves the company’s natural rhythm so there is as little interruption to operations as possible.

Again, if your company is one of the SMBs looking to improve security and cloud infrastructure, call Advance2000 at 1-800-238-2621. Our private US database centers offer resiliency solutions through a variety of options. Advance2000 servers run some of the most intensive processing programs on the market, so if you’re looking to transition your desktops to the cloud to extend the life of your existing hardware to stretch your budget a little farther, we can help. For a quote or to demo our high performance cloud computing technology, contact us now and get your 2019 off to the right start.

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