IT Budgeting Key Initiative Overview


Archived Published: 07 April 2014 ID: G00262977

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Summary

This overview provides a high-level description of the IT Budgeting Key Initiative. IT leaders can use this guide to plan and create an IT budget that serves as a management tool to help the business realize its strategic goals, demonstrate IT's business value and enhance the business's view of IT.

Analysis

Figure 1. IT Budgeting Key Initiative Overview
Research image courtesy of Gartner, Inc.

Source: Gartner (April 2014)

An IT budget is both an accounting tool for controlling how money will be spent and a management tool for helping business leaders understand how IT expenses contribute to business value.

IT budget development, presentation and management are opportunities to link IT capabilities with business performance and value. Driving the IT budget from the enterprise's business strategy affords the opportunity to change the business's focus from IT as a cost center to IT as a resource to help achieve strategic goals. Involving business leaders and other stakeholders in the budgeting process helps ensure budget approval and provides another means of demonstrating how the IT organization is the best alternative for helping the business use information technology to improve productivity, innovate and gain competitive advantage.

Consider These Factors to Determine Your Readiness

What IT Budgeting Means to CIOs

CIOs should consider these points before beginning an IT budgeting initiative:

  • Begin the annual IT budgeting process before the finance department issues budget templates.

  • Drive the IT budget from the enterprise business strategy.

  • Involve key stakeholders in IT budget development to ensure that the needs of the business are understood, and that the business understands how IT services affect business performance.

  • Make expectations around benefits explicit and measurable.

  • Strive to build a strategic relationship with the CFO, based on mutual understanding and support to work toward common goals.

What IT Budgeting Means to IT Leaders

IT leaders should consider these points before beginning an IT budgeting initiative:

  • Become involved in the strategic planning process or, at a minimum, have access to the final outcome to understand how the business aims to win in the marketplace.

  • Work with your business counterparts to establish key assumptions about enterprise revenue growth, pricing, the availability of critical resources, competition or public-sector service alternatives, and the overall economic activity affecting the enterprise during the budget period.

  • Ensure IT management is prepared to demonstrate their business knowledge of how IT expenses and investments affect business performance.

  • Evaluate your organization's current view of IT costs, and consider whether or not it supports the kind of decision making that IT and business leaders need to make in relation to IT investments.

Conduct Your IT Budgeting Initiative Using This Structured Approach

  • Analyze Information: Analyze the business's strategic plan, and engage your business counterparts to identify needed business capabilities. Analyze and organize IT expenses into service categories that the business can understand and link to business value.

  • Benchmark and Model: Compare your business and IT performance to published comparative data to help business executives gauge the level of IT spending being requested.

  • Develop Governance: Develop processes and policies that involve key business stakeholders in establishing the IT budget and ensuring the needs of the business are effectively understood and reflected, and the link to business performance is explicit.

  • Monitor and Assess: Observe and evaluate to make adjustments that will improve business outcomes. Manage and measure IT services and capabilities in terms that senior business management can easily understand and see the link to business performance.

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