When your IT budget is aligned with the activities that drive your business forward, you’re in great shape for growth — your employees have what they need to meet your goals and can respond to new opportunities without having to deal with IT-related speed bumps.
The key is to spend most of your IT budget on the IT areas that actually drive revenue. In this final installment of our alignment series, we present five questions to help get your IT budget and business goals in alignment:
1. First and foremost, does your IT spending represent how you make money?
Your IT budget should reflect the things your business does to grow. It’s easy to have gotten into the habit of allocating most of your budget to keeping your IT running — some companies spend as much as 80% of their IT budgets on their data centers. It’s also common to overspend to keep old technology alive. While it’s certainly important to keep your IT running smoothly, it shouldn’t be at the expense of innovation that will help your organization bring ideas to fruition and grow. CIOs need to press for a budget that will keep IT both running and growing, while also looking for ways to lower the costs of maintaining the older technology when possible.
2. Does your budget cover disruption risks?
Nothing reveals a misaligned budget quite as effectively as a disruption. When you’re suddenly faced with a hack, a weather event like hurricane Harvey or Irma or some other disaster, your business needs to continue to operate and generate revenue anyway. Look at your processes and procedures to identify risks — what must be covered to sufficiently minimize business disruption? Cover that.
3. How much of the budget must you slice off immediately for industry standards and compliance?
If your business is regulated, part of your IT budget must go towards meeting compliance requirements. It’s the cost of doing business — but how much? If you’re spending more on compliance than on the IT that drives your business forward, your IT budget is probably out of alignment with your goals.
4. Does your budget accurately represent the priorities on your IT roadmap?
Your IT roadmap lays out your current IT capabilities — including functions, staff and technology resources — and serves as your aspirational document defining the incremental steps needed to get from A to B. It should also align with your business strategic plan. But does it also align with your budget? Forecasting can be tricky and some steps get accelerated or decelerated based on what’s going on in your business that given year. Adjusting your IT budget so it reflects your roadmap priorities is one of the best ways to ensure you stick to a growth path.
5. Where can you drive out costs?
What changes as fast as technology? Not much. This means that each year you can probably find new ways to save on IT expenses and use that money for other things, like additional staff or new services that can grow your business. You might have an outdated telecom system or legacy platforms, for example, or a WAN system that’s no longer necessary because your team is now mobile. Pricing for internet service contracts and mobile phone plans also change dramatically from year to year, so be sure to check that you have the best deals available today. Few things are better for budget and business goal alignment that not wasting money!
Team, process and tools
Now that you understand more about aligning your IT budget with your business goals — and having the right IT team, IT processes and IT tools in place — you may be even better prepared to have productive conversations with your leadership team and department heads about planning for 2018. Feel free to access and share our complete Leapfrog TechBrief: How To Determine If Your IT Is Aligned With Your Business Objectives here and in our Resources section to help with your discussions.
If your team fully answers the above questions every year and updates them each quarter as your year evolves and new opportunities or challenges arise, you will create a process for keeping your IT budget perpetually aligned with your business goals. Typically, this process is led by an organization’s CIO; but for Leapfrog clients that don’t have a CIO, one of our representatives can serve that role, You need IT representation in the room! This way when your teams in sales, marketing, operations and other departments come up with great ideas, you’ll be able to know IT’s role and budget needs so you can bring the ideas to fruition. New ideas may require a change to the budget, but maybe your current budget can be applied in different ways.
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