1. Practical IT Research that Drives Measurable Results Develop Successful Strategies for Budget Planning, Proposal, and Negotiation

2. This research is designed for: This research will help you: Understand the various concepts, calculations, and preparation techniques and how they relate to budget planning. Use templates and checklists to develop a complete and credible budget proposal. Establish a basis for ongoing budget success within real organizational constraints. IT leaders responsible for IT budget negotiations The annual budget process determines whether IT will have the staff and dollar resources that it needs to deliver expected services. With tightening budget constraints, IT leaders must be capable of accurate financial and staff forecasting in order to adequately support and negotiate budget levels. When the approved budget is inadequate to address known requirements, it’s essential to set clear expectations with end-users so they can develop alternative plans. Formal proposals may be tedious, but with accurate projections, IT is better equipped to support and argue their case for cash. IT leaders responsible for IT budget proposals Use this research to get a handle on what effective budget proposals should include in order to deliver expected value to the enterprise.

3. Executive Summary As budget levels are always constrained: Understand what the constraints are early; don’t wait to have a budget proposal trashed Find ways to reduce expenses on adjustable non- discretionary expenses to create capacity for new initiatives Negotiate priorities with the business units; not all demands can be met Back-up estimates with evidence of likely costs; be credible Provide detailed documentation Anticipate adjustments to budget proposals: Take constraints seriously: they are not mere guidelines Avoid imposed cuts by providing detailed budget documentation Seek ways to get funding for essential initiatives that have not made the cut Invest the time to understand what resources will be required to meet current service levels, the changes required to support organizational unit plans, and the changes to IT needs. Approved budgets determine IT’s capacity. Getting what IT needs to deliver required services should be the objective of the budget process.

4. Follow six simple steps to ensure your budget includes resources needed to meet organizational goals Adjust scope and priorities Find further cost- reduction opportunities Reduce contingencies Prioritize projects with business units Negotiate with executives to close the gap between the requested amount and the approved amount Constraints Capital vs. operating Discretionary vs. non-discretionary Effective rationale Budgeting scope Cost-saving opportunities Changes to current costs Cost of projected changes Volume changes Dropped activities New initiatives Contingencies Cost increases Expenses to date Year-end forecasts Pricing changes Gather Requirements Create Proposal Finalize Budget 1 Calculate Current Costs 2 Determine Required Changes 3 Develop Estimates 4 5 6 Create and Submit Budget Proposal Negotiate Deal with Final Approvals

5. Formal proposals may be tedious, but with accurate projections, IT is better equipped to support and argue their case for cash Full budget management is essential to success with ongoing business co- operation and satisfaction. This includes setting the budget to reporting against it, completing benefit realization reviews and maintaining involvement of users, business, and executives. IT Manager, Government Don’t underestimate the value of a complete budget proposal – it must be complete in order to accurately assess, control, and monitor spending. IT Leader, Technical Services It's important to understand the baseline operating cost model for business systems, so that there is adequate funding for both maintenance and support resources. Projects can then be assessed on their business value merit, and changes made over the course of the budget cycle. Director of IT, Business Services Firm In order to stack up to business and end-user expectations, IT leaders say the budget is essential: Info-Tech Insight 93% of IT leaders surveyed believe budget proposals are necessary for ongoing success in setting and meeting realistic expectations. ” “ ” “ ” “

6. Don’t let fear or uncertainty derail planning; this report will help you sift through your concerns and resolve them Budgeting fears are not unfounded and you are not alone in your apprehension. In fact, 45% of people surveyed are very interested in learning about budgeting metrics like estimation and projection, proposals, calculations, and negotiation - regardless of enterprise size or maturity.

7. Most IT leaders (80%) think a workable budget is difficult to produce “It takes time and effort to create a workable budget.” “Clear knowledge of the tech industry is necessary to project costs appropriately.” “IT must have an accurate picture of the rest of the business, which is rare.” “It requires many hours of interviews with many departments, staff, and vendors.” “You need to have extensive experience and knowledge of historical IT costs.” “The economy and business state drive the budget regardless of planning.” “Budget definition and process must be clearly defined before beginning.” “Budgeting is more of an art than a science in this workplace.” “The process is easy, provided priority setting and proper justification exist.” “As long as you track historical trends, the process is fast and painless.” 100% 50% 0% Take the time to understand the market and economy, as well as factors specific to the organization, in order to maximize and simplify the budgeting process. Use historical data and get vendor quotations to make estimates more accurate. Get management to set overall organizational priorities (e.g. increased sales over cost reductions) to frame priority-setting. Keep user management informed as to what initiatives are safe and which are threatened by expense reductions. Streamline estimation, prioritization, and communication to simplify the process

8. A successful IT budget meets four key success criteria: delivery, contingency, approval, and sustainability

9. Budget planning needs are not dictated by enterprise size: for success, small organizations need to focus the same effort as large Survey data indicates that success is directly related to the amount of planning completed, regardless of enterprise size, so smaller organizations need to focus on the same planning measures as larger organizations. small low high Enterprise Size It is unnecessary to complete a budget proposal because we're a small organization and need the flexibility. IT Manager, Technical Services No matter how large the organization, you have to do the due diligence to substantiate your requests to the business. Director of IT, Manufacturing ” “ ” “ large There are no clear distinctions between enterprise size and the amount of budgeting planning effort exerted – all organizations report the same breakdown. Planning Effort Exertion Breakdown

10. Budgets are generally set for one fiscal year. Ensure that management is aware of the multi-year implications of any projects or contracts that span into future fiscal years. Where funding is uncertain, break projects into shorter independent phases. While organizational budgets involve both revenue and cost, IT budgets usually include only expenses. Even when IT costs are allocated to various user departments, these allocations are usually not set by IT or tracked as IT revenue. Understand the organization’s accounting approach before budget preparation IT cost is generally budgeted in its own cost center. If IT costs are separated across multiple cost centers (e.g. one for applications and one for infrastructure), a distinct budget must be developed for each. If the IT budget is part of a larger department budget (e.g. administration), IT should provide input into the budget for that cost center. All organizations distinguish between capital costs and operating costs. However, while some organizations treat the budgeting of IT capital costs in a special way, others consider all IT dollars to be the same. The distinction between non-discretionary and discretionary expenses differentiates those parts of the budget that are essential for normal operation (and must be approved) from those that are investments in new solutions or are to improve internal IT performance, and are not required for normal operation. Cost centers: where does IT fit? Revenue and expenses: should I worry about both? Multi-year projects: how will I ensure future funding? Non-discretionary and discretionary expenses: what do I need to know? Capital expenses and operating expenses: does it make a difference for IT?

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