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Drawing up an IT budget checklist

Looking into the future: While you may not have a crystal ball to help you with budgeting, intelligent planning will help you make good decisions

In the first of a series of monthly columns on information technology issues for businesses, Fifth Step chief executive officer Darren Wray looks at how IT fits into the business budget.

It’s that time of year again when those with budget responsibility are being asked to submit their final numbers. With this in mind, it is worth remembering that of all the areas up for review by the Board, IT will often be the most hefty.

IT is (or should be) a strategic asset, servicing the business and helping it meet its strategic and tactical objectives and revenue targets. The challenge is to ensure that IT and business budgets are aligned. In some organisations this communication is only done when the budgets are being finalised.

If you don’t have IT budget responsibility you might think that this article has nothing to offer you ... please reconsider, and make sure that your IT departments are working with you and your organisation to ensure the right levels of strategic alignment.

IT budgeting is a tough nut. The constant levels of change that exist in IT, some of which may offer the promise of direct business benefits (efficiency saving and cost reduction being the most usual) are often hard to predict.

To help you get a grip and ensure that everything is logged that will have a direct impact on the business, here is my IT budget checklist.

Business demand checking: this ensures that the business budget owners and stakeholders understand the demands that they expect to place on IT in the coming year. Ideally this is done a little earlier in the budget cycle, however, it is better done late than not at all.

If your business peers produce a strategy document make sure that you are reading and absorbing it while translating the business objectives into IT needs. An example might be where a business objective states a double-digit growth for the coming year; what does that mean to your computer systems, to your storage capacity requirements, the number of e-mails sent? Will your IT systems, process, procedures and people be able to cope with the target levels of growth? Your budget needs to reflect the changes needed.

Having absorbed the full document, meet with your peers, walk through the budget challenges with them, where do they think they will need IT’s assistance? Take them through the IT budget and associated strategy. Remember to pitch the conversation to the audience.

Having completed your business demand checking exercise, you should have a better understanding of the business strategy, and the demands that will be placed on IT throughout the year. That can then be reflected into your budget.

Common checks: the name that I give to the checklist that I run through every year. It changes and develops, and can be customised to your organisation’s demands as required.

Cyber security: cyber and information security are perennial favourites as there is always something that needs to be checked. Recent hacks have focused board attention on risks that organisations face, sometimes without appreciating it. Boards are increasingly expecting to see budget lines for cyber and information security, so don’t leave it out!

Hardware upgrades: depending on the size and complexity of your hardware estate, you may be replacing hardware (laptops, desktops, servers etc) on an as-needed basis or on a regular (three-plus year) cycle. Make sure you have assessed the hardware that will need to be purchased or replaced in the next budget cycle and match the changes to actual business requirements rather than relying on what has gone before. Make sure you leave enough time to talk to vendors so you can adequately compare products and then negotiate hard.

If the way that you’re changing your hardware is to head in a more managed service direction (servers provided and hosted by a vendor), then you may be looking at your hardware in a different way; the capacity planning aspects of this are still vitally important in negotiating the best deal.

Software licensing: this can be very complex, with savings or penalties to be applied. Talk to your software vendor, ideally with their software licensing expert. If your software vendor doesn’t have a licensing expert with experience of dealing with organisations of your size it is worth finding one that does. This can make a tangible difference to your software licensing costs, and help ensure that you are not under-licensed. Make sure they find the sweet spot for you.

Business critical software updates: being prepared for updates to the business’s critical software is a vital part of budget, resource and availability planning. Updating any software is a project that needs to include the right amount of analysis, planning, implementation and testing. Budget for the project management effort required to keep this project moving and on track.

Vendor management: as part of your budgeting and continuing improvements, you should implement and overhaul your vendor management process, to make sure that your vendors serve your organisation as you would expect, and to ensure that they’re not introducing resiliency or cyber-security risks.

Perform a disaster recovery test: many Bermuda-based organisations have various aspects of their disaster recovery processes tested during the hurricane season. If your organisation has offices in other locations, make sure that they are performing and documenting their tests to ensure audit compliance.

Regulatory changes: regulatory changes are a fact of life. Make sure that your budget includes provision for those that are going to demand attention in the coming year.

Darren Wray is the CEO of Fifth Step, and has over 25 years of IT and management experience within the Financial Services and other sectors. Fifth Step operates globally from its offices in Bermuda, London and New York, providing IT Leadership, Change Management, Governance services to executives and senior managers within Insurance, Investment, Legal and Banking organisations of all sizes. For more information about Fifth Step, the team and the services they provide, visit www.fifthstep.com.