As we approach the holiday season and the end of the business calendar, we also enter information technology budget-planning time.
While IT budgeting may not sound like the most enjoyable end-of-year activity, it is undoubtedly one of the most important.
The time to budget for the next year is right around the corner, but it's not too late to get started.
Budgeting varies drastically depending on the details of your company, but it's something your IT team must be on top of.
Here's what you need to know about tech budgeting for 2022.
What is IT Budgeting?
Much like every other sector of a business, IT teams must adhere to a budget. The budget is how much money the company is willing to allocate to IT projects and processes. The budget is both recurring expenses and one-time expenses. Examples of budget items:
- Staffing: The cost associated with IT employees.
- Software: Support contracts, software licenses, and any other software expenses.
- Hardware: Installation cost, equipment fees, warranties. Anything related to the cost of owning the physical hardware.
- Subscriptions: Subscriptions may vary depending on the company, but they often include cost for training and software as a service.
- Outsourcing: An outsourced project or services, consultants, etc.
Why Does IT Budgeting Matter?
It budgets are crucial for the same reasons as all budgets. For one, it eliminates the need to request resources for every single expense. Ultimately, the IT budget serves as a roadmap to efficient operations. It clearly articulates the resources available. This plan limits the need for additional requests.
The purpose of the IT budget is to ensure good planning and adequate resources. The budget helps guide IT decisions and initiatives. Furthermore, it helps both the IT department and the company meet its goals. The budget should reflect the company's goals while also ensuring that the IT department has the resources that it needs.
With a clever budget, you can see total resource allocation. This information can provide you with helpful insight into your direction. The budget (and subsequent benchmarks) will help you stay on track with your IT strategy.
IT Budgeting Tips and Best Practices
- Reflect Your IT Strategy. Your annual budget should not be an endless list full of wishful thinking. On the contrary, the budget should reflect your IT strategy. It should align with what you've been communication up to this point, mapping seamlessly onto your strategy.
- Audit your IT infrastructure. Assess your IT infrastructure, applications, security concerns, etc. To create a logical budget, you must understand your current IT situation and what needs to change.
- Review inventory. Don't wait for disaster to strike before addressing old assets. Review inventory to determine which PCs, servers, phone systems, printers, etc. are out of warranty or needing replacement. Upgrading hardware will undoubtedly impact your budget, so this is one crucial area to consider. Using lifecycle replacement (LCR) practices can go a long way.
- Keep it simple. Don't overcomplicate your IT budget with jargon. Make sure that your CFO and upper management can understand your budget. Doing so will help you get your budget approved quicker and without unnecessary back and forth.
- Assess this year's spending. Detail your current spending. This will help you determine where you may overrun your budget or have money left. It will be easier to determine where you may need to alter the budget in the future based on your findings.
- Understand concerns. Learn more about your CFO's spending priorities and hesitations. Understanding how your CFO approaches budgeting it paramount for creating an effective budgeting proposal.
- Avoid comparison. Commonly, executives ask for benchmarking with similar companies. However, comparing your IT budget to others is unreliable and won't help you get the budget you need.
- Realistic expectations. When planning your upcoming budget, keep in mind that business may not fully be back to normal. Has your company returned to pre-pandemic levels? Set a budget that's aligned with where your business is at right now, keeping the focus on necessary costs.
- Consider the future. Your 2022 IT budget should focus on strategic needs for the years ahead. What are your long-term objectives? While you certainly need to make sure you have the resources to handle immediate projects, you should also invest in major future initiatives when possible.
- Analyze the budget. After you create the budget, take time to analyze it. Make sure you understand which budget items are related to daily operations, which focus on productivity, and which are geared toward research and development.
- Benchmarks. A budget is a tool you should use all year. Heading into 2022, return to your budget. Assess how your actual spending aligns with the budget. This will help you keep on track and avoid overspending. It will also give you insight into how to adjust your budgeting moving forward.
How Should You Change your Budget From 2021?
As you might imagine, the process of crafting a comprehensive IT budget is quite extensive. In a pinch for time, some teams simply tweak last year's budget. However, this is a huge mistake that will do your team a disservice.
Gartner predicts that IT spending will rise from $4.2 trillion in 2021 to 4.4 trillion in 2022. Deloitte predicts that IT spending will shift to digital transformation. Before the pandemic, the majority of IT spending was on daily operations.
In 2020, digital sprints were a key factor for success. However, moving forward, place priority on more deliberate strategies for digital transformation. Another strategic priority is improving productivity.
Furthermore, many companies will seek to make technology investments that foster flexibility. They will invest in IT processes that best prepare their team to respond to unpredictable changes, like the many they faced due to COVID-19.
Cybersecurity must continue to be a priority. In 2021, cybercrime cost the world $6 trillion. An increase in cybercriminals, growingly complex cybercrimes, remote work, and gaps in IT security all contributed to the growth in cyber security breaches. Cybercriminals will only continue to get more advanced. IT teams should not understate the importance of cybersecurity in their 2022 IT budgets.
BLM Technologies is Here to Help
Creating a unique IT budget for your team is incredibly important, but it can be challenging. Of course, you want to create an accurate budget, but you also want to ensure that the budget fully supports your IT strategy.
BLM Technologies is here to help. We offer professional IT support for all tech business solutions. Learn more about how we can help your team prepare for your 2022 budget today. Contact our technology experts to learn more.