How to Communicate Your IT Budget, Part I

In many organizations, Information Technology (IT) represents a  significant portion of the overall budget.  In fact, IT is typically among the top expenditures.  Consequently, this budgetary prominence drives a corresponding level of scrutiny by management; an exercise that is often found to be time-consuming and frustrating for all concerned.

Much is written about capturing the value of IT and leveraging processes to ensure value-delivery.  Organizational cultures typically dictate the overall budget process.  During my career, I have labored under many of these systems; each has their advantages and disadvantages.  

I am going to leave the overarching budget process for others to debate; the focus here is on how to communicate and sell your budget.  

Your budget proposal needs to be communicate in a manner that will resonate with executive charged with approving the budget.  In my experience, this is where the process fails.  

As with many issues, ineffective communication is frequently the core issue.  IT budgets can often be opaque and hard for management to understand. The key is presenting the budget using language your audience is familiar; avoid technical jargon and avoid the trap of providing too much detail.  When someone asks the time, they do not want to know how to build a clock.

I believe a good starting point is to understand what drives the budget, what IT controls, then link the budget with the organization's objectives. 

What follows is an outline of a process for forming and communicating an IT budget.


Step One - Develop a Common Language

Ideally, before start developing your budget, it is a good idea to understand what  has done before and how was received. What worked?  What did not?  Where were the pain points?  Learning from the past can give some good indicators of problem areas.

Next, I advise developing a straw model for your budget, including the major categories.  Consider the model a tool for testing your pitch and tuning the message to better resonate with your target audience.

Sharing this model permits you to focus on explaining your core drivers and budget categories while avoiding being sidetrack by discussing the associated amounts.

Quite often, non-IT professionals do not understand what drives the IT budget.  For this audience, the objective is to communicate how external drivers impact much of the budget.  Examples of these drivers can include headcount growth, application portfolios, office locations, and utility expenses.  

Leveraging graphics can be a simply why to illustrate these points.  




In this example the budget is composed of five major categories:
  • IT Staffing (Personnel) costs - salaries, travel, training etc.
  • Core IT costs - Support, infrastructure, compliance requirements
  • Organization Headcount Drive Costs - End-user hardware, software and service licensing, communication, utility costs
  • Support of Existing Business Systems - Lifecycle costs for support, licenses, and eventual retirement
  • Cost for New Systems - Cost to develop and deploy new systems.  This element can also demonstrate how tightly integrated IT is with the business (and why IT needs to be at the table).
When you achieve this objective, you can see the light come on above their heads; most find it a revelation.

With a common language and understanding of what drives the IT budget, you can now build your budget in to fill in the details which will be covered in Part II which will follow soon.

Popular posts from this blog

How to Communicate Your IT Budget, Part IV

How to Communicate Your IT Budget, Part III

Defining the IT Roadmap in Life Science - Part III