Organisations of all types struggle with Information Technology (IT) budgeting. This often happens because the IT team doesn’t understand the budgeting process and the finance team doesn’t understand IT.
Developing an IT budget requires more than just throwing numbers onto a spreadsheet. It demands that the organisation’s leaders work together to define IT’s role in achieving the organisation’s objectives…transforming IT from a cost into an investment.
An IT budget is the amount of money spent on an organisation’s Information Technology systems and services, including compensation for IT professionals and expenses related to the construction and maintenance of enterprise-wide systems and services.
The IT budget is typically overseen by the Chief Information Officer (CIO) or IT Director; the organisation’s top executive. However, as IT has become central to business results, the scope and allocation of an IT budget has become more complex because not all IT spending falls within the IT department.
IT budget components
Compensation costs for IT professionals fall within the IT budget, including costs for external consultants used by the IT department. Expenses related to building and maintaining enterprise-wide and back-office systems are also included in an IT budget. These encompass Enterprise Resource Planning (ERP) applications as well as Accounting, Finance and HR applications.
The IT budget also encompasses hardware expenditures; bills for laptops, organisation-issued mobile devices, servers, routers and other networking equipmenttypically funded by the IT department.
Other costs that usually reside within the IT budget include data centre expenses and bills for cloud platforms.
Items that tend to fall outside the IT budget include applications deployed for and used by specific business units. Marketing applications, such as those that enable social media campaigns and content management systems tend to fall under the marketing spend rather than the IT budget.
IT budget approval process
Although the CIO has responsibility for the IT budget, they are not the only person to devise and approve the entire package. Even for the technology spend that falls within the IT department CIOs often devise and manage that budget in conjunction with executive IT steering committees; other executives and directors; and other information Chief Executives, including the Chief Digital Officer, the Chief Data Officer and the Chief Analytics Officer.
Whilst the IT budget rarely includes all of an organisation’s technology spending, best practices dictate that the IT department still gather a holistic view of technology costs regardless of where they reside. This allows the organisation’s leaders to ensure that there are no redundancies between the IT budget and other business unit budgets, thereby keeping overall IT spending in check.