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It was the best of times, it was the worst of times. It was the age of ever-cooler technology. It was the age of ever-increasing spending on IT infrastructure. It was that time of the year – the season to present our annual IT budget, with company leadership insisting on it being received, for good or evil.
After completing my fair share of budgets over the past several years, I admit there have been more than a handful of times where the budgeting process was comparable to a dark Charles Dickens novel. The budget would be “packaged” and presented for executive approval as expected, but only after months of planning, reviewing, justifying, and negotiating savings opportunities.
How the IT budget is presented is the key to bypassing those “worst of times” and being able to confidently steer your organization to the best of times. This may sound relatively straightforward but let’s face it – IT and finance organizations are not known for their marketing or communication skills; it’s just not in the DNA of either group. So then, how do you take your technology budget, containing a multitude of services, from network to datacenter operations and from it, develop a sound IT operations plan and budget which the business understands?
It’s the tale of two budgets……
The solution is providing clarity and transparency, translating the ongoing costs of previously approved investments and providing options. Focusing on these three areas will result in the view that your IT organization is a high-performing business partner and not just another allocation to the business for which there is little or no control.
First, focus on explaining your budget in a manner which does not require an IT decoder ring for the non-technical folks. One of the qualities that I consistently see in high-performing IT executives is the ability to translate technology and corresponding costs into the business drivers of your organization. Keep your presentation in tune with the corporate strategy and growth drivers. The easiest way to break your costs down and translate into business drivers is to identify the product portfolios you support. For example, if you’re a pharmacy operator, identify how much of your IT infrastructure is required to support traditional brick and mortar pharmacy services versus online pharmacy services. Furthermore, if on-line pharmacy services is experiencing rapid growth and has become the cash cow be sure to explain the impact on the information technology cost structure. Next, translate how online services, supported by IT have improved the customer experience (and possibly lowered transaction costs). The success of your presentation will be measured not just by gaining budget approval, but on your ability to provide transparency into your cost drivers. If you’re really on top of your game, you can even show how segments of your IT shop (like online pharmacy services) are actually profit centers.
Second, you can further enhance your reputation as a trusted business partner by identifying the ongoing impact of approved investments that reside in your budget. These investments are likely projects that were approved and implemented in prior years and now are part of the infrastructure, which require ongoing support and maintenance. Having a previously-established governance process is necessary in order for this conversation to be effective in your presentation. I once worked with a CIO who consistently reminded his organization there was no such activity that was referred to as an “IT Project.” All projects within the IT organization either supported, enhanced, or created new services which were understood by the business partner – and the investment had previously been approved jointly with the business. The governance committee responsible for establishing these processes should be made up of members from the executive committee who will ultimately approve your budget, so that they can be familiar, knowledgeable, and even involved in the investment as they are made. Likewise, many of these investments are predicated upon creating savings in your infrastructure or elsewhere in the organization. Therefore, be sure to not only identify the impact of ongoing costs but also identify where the savings or enhanced revenue have been realized in the organization.
Finally, identify the investment opportunities in your infrastructure and present them as ‘levers’ that the executive committee can ‘pull’ when they look for reduction opportunities in your budget. These levers can range from outsourcing portions of your infrastructure, to investing in new technologies that will result in performance improvements or efficiency gains in the future. In fact, outsourcing is typically an easy sell when it addresses an area of your organization that is not a core system or competency. As an example, many IT organizations have become responsible for managing the telecommunications infrastructure and related invoices for the entire organization. This can be a labor-intensive process which often requires specialized knowledge of telecom billing. Many outsource companies today can provide services to automate the paying and auditing of your telecom invoices – and even make the carriers’ job of servicing your account much easier. This is a prime example of a lever you want to present to an oversight or executive committee because although it makes fiscal sense, you also want to obtain mutual agreement that it will also result in tough decisions with respect to staff reductions. Presenting options such as this will prove that your IT shop is not only looking to be a partner to the business, but also stepping up as a leader in reducing cost and improving services and performance.
In talking with a number of colleges, this is the time of year many IT organizations begin to work through their annual IT budgets. Presenting transparency, impact of prior investment through governance, and providing cost-saving options are the keys to providing sound fiscal leadership and to developing a reputation as a trusted partner to the business. As mentioned at the beginning of the article, the only potential “evil” side effect of following this outline – now that you are an expert – is that you may get cajoled into assisting the marketing department with its annual budget planning. As sometimes the case, no good deed goes unpunished.
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