What is Information Technology Budgeting?
Information Technology budgeting includes evaluating the cost of products and services, estimating income, determining what products or services the organization should make, setting priorities for corporate finances, and deciding where money should be spent. Essentially, IT budgets are a financial reflection of a company’s strategy.
Why is IT Budgeting Important?
Today’s Information Technology (IT) organizations are engaged in an unprecedented challenge: they must balance the need for a clear roadmap, with the need to respond to the needs of the business. This challenge is profound and requires a broad reexamination of the traditional approach to budgeting in IT.
The traditional approach is based on the notion that IT must be planned, executed and managed separately from the rest of the business. This view is challenged today by the realization that the success of today’s IT organizations is closely aligned with the success not only of the business but also of the enterprise as a whole. That is how to plan an IT budget in this age.
7 Information Technology Budget Categories
What exactly do you budget for? What should an IT budget cover? There is no proper answer to this question without a good understanding of the various information technology budget categories. Of course, requirements vary by company and industry. However, these broad categories are a great guide to set out when planning your budget.
Hardware includes all systems in use in the company, including desktops, laptops, tablets, and mobile devices. Hardware is also used to support the network infrastructure within the company—this includes routers, switches, firewalls, and wireless access points.
Software costs include the cost of purchasing software licenses, including upgrades and renewals for existing software. This category should also include any upgrades you anticipate, as well as any cost of support for software you may be considering.
Support and maintenance
Support costs include your internal support staff, as well as any external vendors or consultants you use to provide support. These costs are typically broken out by vendor and by type of service provided, including cloud services. These costs are often overlooked because they are so routine. However, they are very much part of the IT budget.
Backup and contingency costs
One of the most important aspects of your data protection plan is knowing how much money you need to spend to keep your company up and running in case of a disaster. This refers to the cost of the systems and solutions that enable backup, disaster recovery, and business continuity vary depending on your company’s specific requirements.
IT Department Staff
IT department staffing costs are what you need to fund in order to run your IT department. Cost to hire a website developer include the salary, bonuses, allowances, and benefits. It also includes money for things like recruiting and onboarding new IT staff or providing IT training.
If the company is launching a major IT initiative, such as a developing a software, it will need to budget for project-specific expenses. A company may be taking on a large project in which it will need to hire app developers or other new employees, purchase new hardware and software, and contract outside help. If the company is not already budgeting for these expenses, they can add up quickly.
When setting up your IT budget, you should include a miscellaneous cost. This cost will allow for unexpected expenses that may come up during the year. It’s important to note that this figure should be as realistic as possible. If you don’t include this amount in your budget, you may find yourself trying to make up for it throughout the year, which can throw off your budget.
Common Mistakes in Information Technology Budget Planning
Various information technology budget examples offer insights into how the process should be approached. From these examples, we can learn from critical mistakes as well, and the most common ones have been collected and explained in this section.
The trouble is, most businesses don’t think of IT as a long-term investment. Instead, it’s treated as an expense to be minimized or avoided altogether. As a result, many business owners tend to delay upgrades or replacements to reduce, instead of optimising costs. Delaying upgrades and replacements can save money in the short term. However, it also means taking on greater risks with your IT security and performance by running outdated hardware or software.
Not having a disaster recovery plan
Disaster planning involves making sure that your backup systems are up to date, that critical systems are accessible, and that employees know their roles in an emergency. A cyberattack is an example of a disaster for which there must be a contingency plan in place. The DRP is also a kind of business continuity plan. In the event of a disaster, your DRP should outline the best practices your company will take to keep operating.
IT budgets are notoriously hard to estimate. For a large project, it’s not just a matter of putting numbers together: you have to figure out how to estimate the unknowable, such as the hidden costs that might emerge through the cost of fulfilling projects. IT managers should look beyond the initial cost of a technology and instead investigate the hidden costs.
They can occur as a result of the use of technology, such as the cost of training staff who will use it or the cost of problems that arise from using it. Hidden costs can also be associated with the technology itself, such as the costs incurred from managing and maintaining it.
Lack of training investment
IT managers need to take a hard look at their budgets for training and development of staff, as well as the tools they use. In some cases, it will be necessary to allocate more money to training and development, as part of a wider effort to invest in new technologies that can improve productivity and efficiency.
Mind you, training is not a one-time event. It should be a continuous process of keeping your employees up to date on security threats and the latest information technology solutions.
Rolling over last year’s budget without an audit
Rolling over an IT budget may be the easiest option, but it can seriously hinder growth. One of the biggest problems with doing this is that it doesn’t take into account any changes in the business from one year to the next. From year to year, the business may change, the company’s structure may change, or it may introduce new technology.
All of these factors can alter IT needs. So, one of the most important things you can do for your business is to audit every aspect of your IT budget so that you know what you are really funding and where you need to make changes with each budget cycle.
Not paying attention to business needs
One of the biggest mistakes budgeting information technology is purchasing equipment or software that doesn’t fit their needs. A business might spend too much on hardware that can’t deliver the required specs for their operations, or they might spend too little and not give employees the technology they need to do their jobs properly.
Before you set your budget, it’s important to understand what your company really needs. Ask yourself if you are buying equipment that fits your business today and can easily be adapted to changing requirements in the future?
With the recent surge in cyberattacks, it is paramount to prioritise cybersecurity during the IT budget planning process. IT departments are under pressure to deliver more with less. This is especially true in the case of cybersecurity, where budgets are tighter than ever. But cybersecurity isn’t just another IT expense — it’s a strategic investment that can pay dividends far beyond anything you can imagine.
At the very least, it can prevent you from making unnecessary losses. Cyberattacks are more frequent than ever, and each one costs an organization tens of thousands of dollars to recover from.
4 Steps of Successful IT Budget Planning
Set the right objectives
Regardless of budget models for information technology, the first step in making an IT budget plan is to outline short-term and long-term objectives. What are the short-term goals that you want to attain? How about the long-term targets? What do you want your company’s IT budget to look like over the next one year, three years, five years, ten years?
These are the questions that you need to ask yourself when creating a budget plan for IT department. This way, you can determine if the project you are working on will have a positive or negative impact on the company’s bottom line.
Before setting out on any project at ProCoders, we collaborate with the client to understand their objectives for the project and draw up an accurate plan. In a project for Roth River, because we understood the requirements and objectives (building an app for web and mobile), it helped us choose the right technology stack.
Thus, by using React, this enabled us to cut the development costs by half. That’s a good example of how setting the right objectives can help you to optimise your budget.
Evaluate your asset inventory
Another important step in information technology budget planning is to evaluate your asset inventory. This process should include a review of all hardware, software, operating systems, applications, databases and network devices. It helps you understand what equipment is currently deployed and how it’s being used. This helps you determine whether the hardware you have can support your future IT initiatives or if you need to make some upgrades or purchases.
Before executing our project with Frontegg, we ensured that we did not only set the right objectives but we also strived to understand the company’s situation. For instance, we understood that they had a small local team and we put this into consideration in our infrastructure procurement.
Set Budget Management Roles
Business leaders should set clear roles for IT budget management to be able to respond to the challenges of digital transformation. Budget management is a complicated process, and it’s important to give key staff the right roles and responsibilities when preparing your IT budget. You don’t want to accidentally hamper your organization’s ability to manage its budgets effectively, so be sure to set the right expectations for your staff members.
At ProCoders, every project we execute for clients has a project manager who interfaces with the developers and the clients. IN this way, it helps to keep track of spending.
Set Contingency Plans
As crucial as it is to be able to plan for your IT budget, you also need to develop contingency plans should your initial IT budgeting estimates prove incorrect due to changes in the economy. Budgeting is an iterative process and you will need to make revisions as you work through the various aspects of your plan.
Having a contingency plan will help you manage your budget throughout the year and ensure that your organization is able to achieve its goals. One of the advantages of hiring from ProCoders is that there are always backup plans. For instance, if any developer backs out, we just replace them with another suitably qualified developer without damaging the progress of the project.
In particular, our project with SDCN was successful because we had a detailed team structure in place to handle challenges. This enabled the project to progress flexibly and the team was also able to fix gaps where they existed. This approach led to a 50% reduction in costs.
How ProCoders Can Help by IT Department Budget Planning
Through our partnership helping various companies to hire remote developers and build software products, ProCoders has extensive experience in information technology budgeting process and can help you optimize your IT department’s resources by providing the tools it needs to plan their budget year-round.
ProCoderscan help forecast, allocate, and price SaaS software to take the pressure off IT budgets. We help IT departments plan for the future by developing solutions to proactively allocate resources.
We have had good testimonies in many of our projects in optimising costs for our clients. In fact, that is why our clients choose us. For instance, by outsourcing the development of their healthcare logistics app to ProCoders, HANDLE Global saved up to 40% in consulting fees had they outsourced to a company in a different country.
As a full-service IT service provider, ProCoders’ consultants create knowledgeable structure for your IT expenditures. It’s all about the discovery phase, on which we determine the hole budget of the project. We work with you to determine strategies that can help you effectively manage technology costs throughout the year.
We offer the planning and expertise to help network your business, introduce new features, increase productivity, and take your business to whole another level.
Regardless of budget models for information technology, the first step in making an IT budget plan is to outline short-term and long-term objectives. What are the short-term goals that you want to attain? How about the long-term targets? What do you want your company’s IT budget to look like over the next one year, three years, five years, ten years? These are the questions that you need to ask yourself when creating a budget plan for IT department. This way, you can determine if the project you are working on will have a positive or negative impact on the company’s bottom line.
IT managers should look beyond the initial cost of a technology and instead investigate the hidden costs. They can occur as a result of the use of technology, such as the cost of training staff who will use it or the cost of problems that arise from using it. Hidden costs can also be associated with the technology itself, such as the costs incurred from managing and maintaining it.
One of the biggest mistakes budgeting information technology is purchasing equipment or software that doesn’t fit their needs. A business might spend too much on hardware that can’t deliver the required specs for their operations, or they might spend too little and not give employees the technology they need to do their jobs properly. Before you set your budget, it’s important to understand what your company really needs. Ask yourself if you are buying equipment that fits your business today and can easily be adapted to changing requirements in the future?
IT department budget planning is often a difficult task. You need to take into consideration many factors before you can come up with the best possible solution. Successful budgeting is critical for IT organizations to meet business needs and continue to support an organization as it grows.
The ability to plan effectively and strategically will enable the IT organization to do more with less and provide infrastructure, platforms, and tools that enable innovation and growth.
Finally, don’t forget that you can use ProCoders to get the most out of your IT: Your business is growing and you need new hardware and software to meet the demands of your business. Reach out to ProCoders to determine the right IT solution and avoid spending thousands of dollars on solutions that don’t fit your needs. Contact ProCoders today to get started!