1. www.techfoundation.org TechConnect Curriculum 2006-2007 IT Budgets that Don't Bite: A Template for IT Budgeting Presented by: Kathleen Sherwin Director, Programs & External Affairs TechFoundation

2. www.techfoundation.org TechConnect Curriculum 2006-2007 Abstract Since technology began to find its way into nonprofits in the 1980’s, budgeting for IT has been a problem. Many nonprofits still have no distinct IT budget or budgeting process, let alone separate capital, operations, and support budgets. This presentation argues that preparation of an IT budget is a critical step both toward controlling IT costs and increasing the usefulness of IT systems. Through the use of standards, templates, and industry experience, nonprofits can develop IT budgets with relative ease, and should.

3. www.techfoundation.org TechConnect Curriculum 2006-2007 Purpose of Presentation The purpose of this presentation is to encourage nonprofit managers to develop and follow IT budgeting strategies and practices, resulting in more effective systems and better control of costs. By presenting IT budgeting as a process and using budget templates, attendees should be able to initiate this process in their own organizations.

4. www.techfoundation.org TechConnect Curriculum 2006-2007 Goals/Objectives Attendees will: Know and apply Total Cost of Ownership & IT Life Cycle concepts in their agencies Learn the 6 steps to developing an IT budget Have spending standards against which to compare their budgets

5. www.techfoundation.org TechConnect Curriculum 2006-2007 Strategic Technology Vision Before you begin your budgeting process, you will need a Strategic Technology Vision, including: How technology will support your mission Management buy-in List of each manager’s priorities Assessment of current IT systems and support

6. www.techfoundation.org TechConnect Curriculum 2006-2007 The Vision Team IT Staff Program Staff ED/Board

7. www.techfoundation.org TechConnect Curriculum 2006-2007 Hard and Soft Costs HARD Hardware Software Professional services Personnel Training Telecommunications Supplies & Incidentals Environment Maintenance Cost SOFT User time – using User time - fixing Helper time Management time Inefficiencies

8. www.techfoundation.org TechConnect Curriculum 2006-2007 Budget Line Items A. Hardware B. Software C. Professional services D. Personnel E. Training F. Telecommunications G. Supplies & Incidentals H. Environment

9. www.techfoundation.org TechConnect Curriculum 2006-2007 Budget Columns Hardware Software Services Labor Training Telecommunication Supplies & Incidentals Environment ItemMaint.NewTotal PC’s Servers Hubs/Switches Routers/F’wall Peripherals Other

10. www.techfoundation.org TechConnect Curriculum 2006-2007 Five Concepts Underlying IT Budgeting A. Projection from current expenses B. Total Cost of Ownership (TCO) C. IT Life Cycle D. Benchmarking against peer organizations E. Mission-driven, top-down planning

11. www.techfoundation.org TechConnect Curriculum 2006-2007 Projection from Current Expenses What is it? Start with current costs, add inflation, add/subtract anticipated projects Pros: easy to understand and do, easy to calculate, generally pretty accurate, generally a straight-line cost increase Cons: no room for new solutions, no measure of effectiveness, easy to hide costs, no challenge for income, sometimes miss opportunity to recognize cost savings

12. www.techfoundation.org TechConnect Curriculum 2006-2007 Projection from Current Expenses For example: We spent $1,000 per month for phone lines and service for 50 staffers, so we need to budget $1,100 per month next year to support 55 staffers.

13. www.techfoundation.org TechConnect Curriculum 2006-2007 Total Cost of Ownership What is it? TCO accounts for all aspects of providing information technology, including purchasing, operations, training, maintenance, support and network services over the expected lifetime of the system. Pros: few hidden costs, encourages multi-year planning, can be made to reflect individual agencies Cons: many numbers are guessed or assumed, often not connected to mission, means many things to many people, easy to double-count or underestimate costs

14. www.techfoundation.org TechConnect Curriculum 2006-2007 Total Cost of Ownership For example: We need to create a new networked office for 5 people. Assuming a 4 year economic life, we need to budget the following: ItemYear 1Year 2Year 3Year 4 System Consultant$1,000000 Cost of hardware/software$7,500000 Hardware updgrades005001000 Networking$500300 500 Training$50000200 Support$1,000500 1,000 Maintenance/Repair05007501500 Total10,5001,3002,0504,200 $18,050 = TCO

15. www.techfoundation.org TechConnect Curriculum 2006-2007 Life Cycle What is it? Every system goes through purchase, installation, maintenance, enhancement, and decommissioning, and should have corresponding costs Pros: budgeted costs vary according to what you specifically plan to do Cons: still a lot of guesswork, need a lot of history to develop estimation basis, not connected to mission

16. www.techfoundation.org TechConnect Curriculum 2006-2007 Life Cycle For example: We try for 3 year replacement, but we bought a bunch of computers under a grant 3-1/2 years ago. We need to replace all of those old machines now, which are more than 1/3 of our total machines. We need to buy 11 plus 2 for new people, a total of 13 machines.

17. www.techfoundation.org TechConnect Curriculum 2006-2007 Benchmarking What is it? Compare the systems you have to your peers’ systems and use their experience as a basis for budgeting Pros: based in reality, can provide many insights Cons: easy to overlook differences between agencies, hard to get information

18. www.techfoundation.org TechConnect Curriculum 2006-2007 Benchmarking For example: Our peer agencies spend about $600 per year per employee on PC hardware; we have 100 employees, budget $10,000 for PC hardware.

19. www.techfoundation.org TechConnect Curriculum 2006-2007 Mission-driven What is it? The classic top-down approach. Decide what you need to achieve, find out how technology supports the goals, budget to the goals. Pros: easiest to justify, makes technology an integral part of agency work Cons: very hard to translate goals into technology, distant from reality

20. www.techfoundation.org TechConnect Curriculum 2006-2007 Mission-driven For example: Words for Nerds run successful, popular programs, but needs to increase advocacy and awareness. We are adding 2 staff members for that purpose. We need to do all we do now plus have 2 more people, which is why we’re adding 2 computers.

21. www.techfoundation.org TechConnect Curriculum 2006-2007 Baseline Costs 1. Determine current actual costs and cost allocations 2. Compute your agency’s TCO 3. Compute your agency’s cost for each year of life cycle

22. www.techfoundation.org TechConnect Curriculum 2006-2007 The Six Steps 1. Develop baseline 2. Develop technology vision statement, decide on new project for coming year 3. Project based on baseline & projects 4. Compare results with your Total Cost of Ownership (TCO) 5. Compare results with Lifecycle plan 6. Compare results with peer agencies

23. www.techfoundation.org TechConnect Curriculum 2006-2007 Hardware Detail ItemMaint.NewTotal PC’s Servers Hubs/Switches Routers/Firewall Peripherals Other

24. www.techfoundation.org TechConnect Curriculum 2006-2007 Software Detail ItemMaint.NewTotal Licenses Maint. Agreements Applications Other

25. www.techfoundation.org TechConnect Curriculum 2006-2007 Services Detail ItemMaint.NewTotal Service contracts Consultants Web developer Applic. Developer Tech support fees Offsite storage costs Other

26. www.techfoundation.org TechConnect Curriculum 2006-2007 Labor Detail ItemMaint.NewTotal Payroll Fringe Stipends Temps/Coverage Other

27. www.techfoundation.org TechConnect Curriculum 2006-2007 Training Detail ItemMaint.NewTotal Books, CD’s, publs Conferences Classes In-house classes On the job Other

28. www.techfoundation.org TechConnect Curriculum 2006-2007 Telecommunications Detail ItemMaint.NewTotal Data lines Internet access Hosting fees Cells, PDAs, WiFi etc. Other

29. www.techfoundation.org TechConnect Curriculum 2006-2007 Supplies Detail ItemMaint.NewTotal Cables, tapes, etc. Ink & toner Paper & stock Other

30. www.techfoundation.org TechConnect Curriculum 2006-2007 Environment Detail ItemMaint.NewTotal Share of rent Climate control Security Utilities Other

31. www.techfoundation.org TechConnect Curriculum 2006-2007 The Six Steps (reprise) 1. Develop baseline 2. Develop technology vision statement, decide on new project for coming year 3. Project based on baseline & projects 4. Compare results with your TCO 5. Compare results with Lifecycle plan 6. Compare results with peer agencies

32. www.techfoundation.org TechConnect Curriculum 2006-2007 Resources TCO worksheets and information – school based: http://www.cosn.org/tco/http://www.cosn.org/tco/ Similar ideas, different tools - http://www.iaete.org/tco/http://www.iaete.org/tco/ An online curriculum - http://www.rms.net/tut_bud_map.htmhttp://www.rms.net/tut_bud_map.htm The economist’s point of view: http://www.educause.edu/ir/library/html/cem9624.html http://www.educause.edu/ir/library/html/cem9624.html From a nonprofit point of view: http://www.techsoup.org/articlepage.cfm?articleid=197&topicid=11&CFID=1665 978&CFTOKEN=1601270 http://www.techsoup.org/articlepage.cfm?articleid=197&topicid=11&CFID=1665 978&CFTOKEN=1601270 A life-cycle article: http://www.lsit.ucsb.edu/funding/lifecycle.phphttp://www.lsit.ucsb.edu/funding/lifecycle.php Another corporate point of view: http://www.costblaster.com/it.htmhttp://www.costblaster.com/it.htm

33. www.techfoundation.org TechConnect Curriculum 2006-2007 Contact Information Kathleen Sherwin Director, Programs & External Affairs TechFoundation 617-354-7595 ksherwin@techfoundation.org.