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There is a Better Approach to Technology Budgeting


If your firm’s IT department hasn’t already been asked to rework its budget, the request is likely coming soon. COVID-19 has had a historic economic impact in the U.S. and abroad, and we don’t know how long it will take for the economy to recover.

Jun 19th 2020
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According to a recent article from CIO Magazine, IDC and Gartner have revised their IT spending forecasts for 2020 in the wake of the pandemic. IDC now expects overall 2020 IT spend to drop by 5.1 percent (compared to their initial prediction of a 5.1 percent rise for the year). While some tightening of the purse strings is inevitable, it’s essential to keep technical debt in mind.

Managing Technical Debt

Technical debt happens when firms choose a solution that may save money in the short term but increases complexity or costs in the long-term.

Some common examples include:

  • Purchasing laptops without cameras. We’ve talked to firms that saved a few dollars purchasing laptops without cameras in the last few years, only to require external webcams for every member of their staff once people started working from home.
  • Supporting several versions of desktop software. Some firms continue to support several versions of QuickBooks rather than transitioning all clients to QuickBooks online.
  • Running hardware or software that is no longer on support contracts or updated regularly. This most often happens with infrastructure – things that are behind the scenes. Firms choose not to invest in these areas because they don’t see an immediate impact like they would with a new app or portal. However, they eventually reach a point where they first need to invest in replacing that infrastructure before they can be truly innovative.

The critical thing to remember about technical debt is it never goes away. You can kick the can down the road, but eventually, you have to pay it off.

As your firm reduces budgets across the board, some technical debt may not be avoidable. However, if you’re aware of where the issues lie, you’ll be better prepared to pay off that debt once we get past budget cuts and start spending later on.

Smart Technology Budgeting

During times like these, it’s more important than ever to ensure you’re spending money on the right things, and getting support for that spending involves getting support from three different groups:

  1. CFO/Finance Leaders
  2. Firm Leaders
  3. Innovation Leaders

Knowing your audience and customizing your message to address their priorities can help you get the support you need from those decision-makers. To help our clients have these conversations, we created a budget template with three separate tabs.

Tech Budgeting for Finance Leaders

Finance leaders want to know how the IT budget will impact cash flow and the tools they use for reporting. They need to know not just what you plan on spending, but when you plan on spending it. A significant technology expenditure can impact cash on hand that might be needed for other areas.

Tech Budgeting for Firm Leaders

Firm leaders want to know how IT spending supports the firm’s strategic plan over the next three to five years. On their version of the budget, it’s important to separately break out costs for security. The cost of things like web content filtering and security training might be lumped in with applications. However, firm leaders want to be able to see exactly how much the firm is spending on security.

Tech Budgeting for Innovation Leaders

Innovation leaders are focused on making changes in the firm and don’t always understand the priorities of different departments. In times of budget cuts, they may strongly oppose cutting their projects, even as they support spending reductions in other areas of the firm. For the third page of our IT budget template, we group the spending differently so innovation leaders can see the financial impact of particular products.

Of course, all three pages of this budget will add up to the same number. But presenting your budget in different ways allows you to have different conversations with diverse audiences, and get support for the projects you really need to invest in.

The original article appeared on the Boomer Consulting website.

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