How to Communicate Your IT Budget, Part IV

Step Four – Presenting the Budget

With the work you accomplished in the previous steps, it is time present the budget.

In all but the smallest organizations, standardize approaches for submitting and presenting budgets are mandated. These approaches may include spreadsheets, online tools, and presentation templates.

A common goal is to produce submissions that are consistent with respect to organization and content. They also provide a way to ensure critical issues are addressed. For example, how each group will manage / be impacted by growth, potential reductions, or other significant events.

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Presenting an Information Technology (IT) budget can be challenging. The forces driving IT costs are not always understood, and even more fundamentally, the very essence of IT is often unclear to executives.

Other factors can complicate the effort. As previously discussed, costs might be held by organizations outside of IT. This can make it difficult to calculate the organization's overall IT spend.

Therefore, even when working with a standardized approach, it is critical that IT submissions address several core elements:
  • Key components of the budget
     
  • Key drivers – both direct and indirect
     
  • Fixed / committed expenditures (by contracts or regulatory compliance)
Context information can also be useful. Some key examples include:
  • IT’s Mission & Vision
     
  • IT’s Objectives / Alignment to Corporate Goals
     
  • Average IT Cost per user (employee) – both initial and ongoing
     
  • Spending Trend Over Past Years
     
  • Benchmarking Data (e.g. Gartner chart of average IT Spend across industries)
Finally, it is always a good idea to have some information explaining:
  • What is Information Technology (and why it is critical for the organization)
     
  • What IT does / must do for the organization
Deciding on which elements to include is situationally. With rigid standardized approaches, it can be difficult to address some of these elements. So be creative and remember the power of Appendixes.

Starting with the Basics: IT’s Budget Building Blocks

Building on some of the illustrations from earlier entries, the budget's key components and their relative size might appear like this:


Next, combine this component buildup with a high-level view of the budget as shown below:


The diagram above illustrates the IT budget’s key components, their relative size, and the internal and external drivers (to IT) behind them.

The left section shows the budget buildup in alignment with the components already outlined. Next, the driver behind each of these components is shown in boxes with arrows to the areas they impact. And finally, on the right, a % breakdown of the budget.

Sometimes, it is helpful to replace the buildup diagram on the left with the % diagram; this simplifies the overall picture well concurrently allowing the discussion to focus on the forces driving the budget. Examination of the actual numbers can follow.

Business Linkage

Illustrating what IT plans to do with the budget regarding projects and their linkage to business objectives is essential. If there is a corporate program plan leverage it as your audience will already be familiar with it. If not, create a high-level plan/roadmap.

The key is to show what the business “gets” for the IT spend. Elements could include new business or IT capabilities, operations, and so on.

Additional Points

Depending on your circumstances, other key points to cover might include:
  • IT headcount plans
     
  • Budget reduction scenarios and trade-offs SWOT Analysis
     
  • Open audit / regulatory matters
Budgets are dynamic as is the approach you use when discussing it. Even with all the moving parts involved, following the concepts outlined here should help you and your organization arrive and an informed decision.


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