Contact us anytime to know more — Kuldeep K., Founder & CEO CISIN
It is becoming increasingly important to plan not just for IT but also for the future. Existing companies have devised numerous ways to create IT Roadmaps for 3, 4, and even five years in advance.
How can you keep up with established companies who have learned from years of experience in strategic IT planning?
What is Information Technology Services?
Information Technology Budgeting involves evaluating costs and services. It also includes estimating revenue, deciding what services or products the company should offer, and setting corporate priorities.
IT budgets reflect a business's overall strategy.
What is the Importance of IT Budgeting?
Information Technology (IT) organizations today face a unique challenge.
They must balance the requirements of establishing a roadmap and the demands of the business. The challenge of budgeting for IT is vast and must be re-examined.
Traditional approaches are based on the idea that IT should be managed, planned, and executed separately from other aspects of a business.
Today's realization that IT success is tightly aligned not only with business success but the overall success of an enterprise is challenging this view. This is the way to budget for IT in today's world.
We budget IT costs even though we are an IT firm. We've learned over the years how to build an IT budget in a way that sets us up for success.
This budget item focuses on three key areas:
- People and Growth
- The Equipment
- Support for IT
People and Growth
Planning for people and growth is the first step in creating a reasonable IT budget. They often go hand in hand, but they can also be separate if you want to concentrate on one of them.
We consider our current spaces, how our employees work, and what tools they use when considering these two areas.
We struggled for years with forecasting growth. This came down to understanding our sales processes and maintaining a pulse of the pipeline for new business and customer satisfaction for an existing business.
With our CRM system and an understanding of the sales process, we can forecast (or contract) growth. Using a CRM and other sales and marketing tools is essential to get a complete picture of your current sales and prospects.
Existing Spaces and New Areas
In most companies, there is at least one place where employees can meet. We review the space's use every year to see if any changes need to be made.
We noticed a few decades ago that our conference room was not flexible enough, so instead of using our stationary chairs and tables, we added rolling chairs and tables. We can now set up the space as a classroom or conference room with rectangular tables for internal training or a training event hosted by customers.
Our focus is also heavily on metrics. We invested in monitors to make the key metrics visible to everyone within our company.
Look at the spaces you have to determine if any changes could be made to improve productivity for your team. Sometimes, clients will move or renovate their space. It's an excellent time to evaluate how your team functions. It will help if you plan your workspace accordingly.
How People Work and What Tools They Use
The work environment continues to change. Many companies allow their employees to work from home. Our team has a single number, regardless of their device or location.
We purchased a Skype for Business phone system with Office 365. The presence of each person is available in "real-time," which allows anyone to quickly check if a colleague or a transferee can be reached.
Our team can now access our system from anywhere. Our budgeting has been simplified, as our Office 365 licensing is a monthly charge that can be treated as a business expense.
We no longer have to budget for updating Office licenses as significant capital expenses every few years.
Consider your business. What is your growth plan? Can you accommodate this growth using your already implemented systems and tools? In this case, you should account for the additional expenses of hiring new staff (such as software licensing fees or buying laptops).
Start planning what you must do and the investments that go with it if not. Keep this in mind if there are usually up-front fees associated with a move to a different system (such as setup or migration costs).
When pricing new solutions, remember to include these costs.
Our team carried laptops, tablets, smartphones, and wireless hotspots a few years back. We have reduced the number of tools we use to a single laptop that can be used both as a desk phone, a portable tablet, and one smartphone.
You may be surprised that your team only needs a few tools to remain productive.
Select the Right License Models for Growth
Please read your contracts very carefully. We see many customers who agree to an "elastic floor" for users or a contract length.
It can cost you a lot if your business is hit by a bump and your need to reduce your number of users. It's not a good idea to lock yourself into a contract that stays the same with your business needs.
Another example is a client who had been in an ISP contract for two years when they decided to move offices. They did not realize that when they transferred their ISP service to the new office, they had signed a 3-year contract.
It can be exciting for businesses to grow, but without proper planning and budgeting, this can become a nightmare.
Please don't leave it until the last moment or when something breaks to plan and budget for new technology to accommodate your business growth. It takes time for new technologies to be implemented successfully. It would help if you gave yourself enough time to get them in place and not disrupt your workflow or processes.
Want More Information About Our Services? Talk to Our Consultants!
The Equipment
Our focus is always on people and growth. With a good understanding of your future and the tools needed to achieve it, you can accurately look at other areas.
Our second area of focus is equally essential: Equipment (maintenance, replacement, upgrade, and new). We divide our equipment into two categories when we budget it internally. First, we only budget for renewal of maintenance.
The second category includes all new or upgraded products.
Maintenance Renewals
Budgeting and maintaining maintenance renewals is straightforward. We will usually know what will be renewed next year and when.
We may choose to only renew in some instances if the benefits are there. We make the same recommendation to our clients. For example, the vendor may continue to provide "support" on a software product that is no longer in production but will not offer enhancements.
These are reviewed on an individual basis by our clients.
Buy New Items
Budgeting for new purchases is also easier with proper visibility. Every three years, we upgrade the laptops of our employees.
It could have been very costly if we hadn't planned for this or had not spaced out the purchase over time.
Each employee has a standard. Our sales team, for example, uses Surface Books while our service team utilizes Surface Pro 4 tablets.
The workstations are identical, making supporting and providing a consistent user experience easier. To save money, we recommend that customers consider leasing equipment. This is a route that several of our customers have taken, and they are happy with it.
Upgrades
We rely on the feedback of our team when deciding what to upgrade. Any upgrade that improves the user experience is considered an upgrade.
In 2014, for example, our staff doubled while our Internet speed was the same. In 2015, we increased our speed because the performance of the Cloud-based system began to decline. In 2015, we upgraded our wireless network based on the growth.
Replaceable
Upgrades can be viewed as replacements, but in many cases, the upgrades are not done for performance reasons alone.
This category is dominated by network equipment. This category may include servers, although we encourage customers to move these workloads into the Cloud (to save money and improve reliability) whenever possible.
Firewalls and security hardware are generally replaced every three years simply because that is the lifecycle of this equipment.
Firewalls and security hardware generally are replaced every three years, simply because that is usually the vendor's lifecycle for that equipment (although we started offering Security-as-a-Service with a firewall included--so our customers don't have to worry about replacing the device).
IT Support
Although average spending data can be helpful, each company will have different requirements in any given year. You may need to spend more if your business is growing.
You may need more if you are beginning to replace outdated equipment with a newer, safer system. Budgeting should be based on the priorities of items identified in steps one and two.
Before you can get into the specifics of breakdowns, deciding whether you will handle your IT in-house or outsource everything or if you plan to use both internal and external resources is essential.
Questionnaire to Help You Choose a Supporting Model
The suitable support model depends on the services you require from your partner or IT department. These are the key questions you should ask:
- Which would you prefer: a fixed or variable cost?
- What is the cost of having an employee who already works in IT provide support for my company? Is it a wise use of the time to have your office manager set up computers?
- What about the renewals of our software licenses? Do you want to handle the renewals for those software licenses?
- What is the maximum amount we will be responsible for them? Do all service desk calls? Only escalate when stumped by the problem? How about support for our business line applications?
- What are the most common large-scale projects we need to complete internally? Some examples include upgrading applications, launching new computers, performing annual security audits, and more.
Billing Models for IT Outsourcing
Once you have the answers, choosing a model of support becomes more accessible. These billing models, the standard for most IT outsourcing companies, work great for small to mid-sized businesses, depending on their support needs:
- Flat Fee - The IT partner will handle everything IT related for a predictable flat fee.
- Monitoring Only - The IT partner will monitor your environment and remotely fix problems when they occur, all for a monthly flat fee.
- Blocks Of Time - the IT partner will handle overflow or urgent situations when you buy a certain number of monthly hours.
- Pay As You Go - The IT partner will only participate if you contact them. Pricing per project is different.
All You Can Eat for a Flat Fee
You need this model if you want to avoid doing anything. You're asking your IT partner for everything IT-related.
This is usually done at a predictable flat fee based on your number of assets or employees.
The services offered include:
- Help desk services.
- Renewals of software licenses.
- Renewals and negotiations with Internet Service Providers.
- Line of Business Application (For example, If QuickBooks does not work as it should, the solution provider must resolve the issue with the vendor and not you).
- Maintenance services that are proactive (to prevent things from breaking down as much as possible).
- Patching security and software.
- Firewall management
- Monitor your laptops, desktops, servers, and other critical IT systems.
- Cloud services management and administration.
All You Can Eat Plans usually exclude large IT projects like email migrations or custom SharePoint sites. The answer will differ from company to company.
Monitoring Only
If you want something that is less expensive but doesn't require a lot of support, this can be a great compromise.
Your IT provider will work with you to monitor and maintain your system. They may, for example, monitor backups and, if one fails, remote into your environment and repair it.
When you sign this kind of contract, make sure that it is evident what types of work are covered and which work falls outside the scope of the agreement.
You could be unaware of an IT outage if you and your company do not communicate about the monitoring.
Blocks of Time
You can use this model if you are willing to assume some support responsibilities but still want your IT firm to be on retainer so that they will help you get out of trouble.
Most IT firms will offer you blocks of time that can be used within a specified period, such as 10 hours per month. The solution provider usually offers a discounted hourly rate in exchange for an agreement to work a specific number of hours.
Pay As You Go
You need this model if you are going to be fully responsible. Beware this model - very few solution providers (good ones) have engineers waiting at the help desk to answer calls.
This model might seem more affordable at first. Still, you will only call if there is a significant problem (such as a hard drive failure with no backup or a ransomware attack).
Be prepared to pay a large amount. Ask for an estimate before work begins and request that the company get your approval before going above the original estimate.
Models of pay-as-you-go are also associated with slower service. Service level agreements (SLAs), a standard for IT service providers, define how fast they'll respond to your problem if you have a higher-level plan.
Pay as You Go clients are only sometimes covered by these agreements. You may have to wait in line behind other customers if you're calling in about an issue. This can be tough if the problem is urgent.
Questionnaire for Potential Providers
These are some of the most popular types of agreements that we have today. Of course, there will be slight differences in how companies package their services.
Here are some questions to ask your provider as you choose the best model for your company:
- Do you Have Service-Level Agreements in Place? How long will it take to resolve your problem? Most often, an SLA is 4 hours of severe issues.
- If you Fail to Meet your SLA, What Happens? Most good IT firms will make some concessions if they do not.
- Can you offer me a cheaper option if we accept a lesser SLA? Many companies offer discounts on service in exchange for extending their SLA.
- What are the Penalties if We Terminate My Contract Early? Most companies have a minimum 12-36-month agreement, but if you cancel before, you'll be charged an early termination charge. Avoid providers that lock their customers into agreements no matter what. Customers don't have to sign long-term contracts and can terminate us anytime. It's not the norm for the IT sector.
- What is the Best Way to Determine Customer Priority? IT companies usually prioritize their customers according to agreement types. Customers with All You Can Eat agreements will be treated better than those who pay for blocks of time. This is important before choosing an agreement type.
- Can the Agreement Type be Changed? We often see customers choose the incorrect model. You should be able to change the order of the agreements based on what you need. You can also change the number of hours in your time or block agreement.
We tell new customers that a well-managed environment takes 5 to 1.5 hours to maintain and manage. Using this rule, you can quickly determine which model is best for your business.
All You Can Eat is usually the best option for a 40-person company that relies heavily upon IT. However, a 5-person startup would be better served by a time block.
Read More: 5 Reasons Why Investing in Technology Services is Good for Mid-Market Companies
Budget Categories for Information Technology
What should you include in your budget? What is the scope of an IT budget? It is only possible to answer this question correctly by understanding the different budget categories for information technology.
The requirements differ by industry and company. These broad categories can be a good guide when planning your budget.
Hardware
All systems the business uses, such as desktops, laptops, and tablets, are considered hardware. Hardware can also be used to support the company's network infrastructure.
This includes routers and switches as well as firewalls and wireless access points.
Software
The software costs include licenses and upgrades for current software, as well as renewals. Include any anticipated promotions and any expenses of software support.
Maintenance and Support
These costs can include your internal staff and any consultants or vendors you hire to assist. These costs, such as cloud services, can be broken down by service provider and type.
They are routine and are, therefore, often ignored. These costs are a part of your IT budget.
Backup and Contingency Costs
Knowing how much you will need to invest to maintain your business in an emergency is one of the critical aspects of your plan for data protection.
The cost of systems and solutions for backup, business continuity, and disaster recovery will vary according to your specific company requirements.
IT Department Staff
You need to budget for IT staffing to operate your department. The cost to hire a web developer includes salary, bonuses, allowances, and benefits.
This consists of the cost of hiring and training new IT personnel and bonuses.
Project Cost
It is necessary to budget for specific project expenses if the company launches a large IT initiative such as developing software.
If a company is undertaking a major project, it may need to hire app developers or other employees. It might also require new software, hardware, and outside assistance. These expenses can quickly add up if the company does not budget them.
Miscellaneous
Include a miscellaneous expense in your IT budget. This will cover any unexpected costs that arise during the course of the year.
This figure must be realistic. You may end up trying to compensate for this in other areas of your life, causing your budget to be thrown off.
Budgeting for Technology Services: Common Mistakes
Different examples of budgets for information technologies provide insight into how this process should be conducted.
We can also learn from these mistakes, which have been collected in this section.
Delaying Upgrades/Replacements
Most businesses do not view IT as an investment that will last a lifetime. It's thought of as a cost that should be avoided or minimized.
Many business owners must upgrade or replace equipment to cut costs rather than optimize them. In the short term, delaying replacements and upgrades can help you save money. It also increases your IT performance and security risk by using outdated hardware.
Lack of a Disaster Recovery Plan
Planning for disasters involves ensuring that backup systems are current, critical systems can be accessed, and employees know their role in an emergency.
Cyberattacks are an example of a disaster for which a contingency is required. A DRP can also be referred to as a business continuity plan. Your DRP will outline your business's best practices in the event of an emergency.
Hidden Costs
Budgets for IT are relatively easy to calculate. It's more than just adding up numbers for a big project. You have to know how to calculate the unknown, like the completion costs.
IT managers must look past the cost of the technology to the hidden fees.
These hidden costs can be a consequence of using technology. For example, the training of staff that will use the system or problems that may arise.
The technology can have hidden costs, like managing and maintaining the system.
Insufficient Training Investment
The IT manager should examine their budgets and tools for staff training. It may be necessary in some instances to spend more on training and developing staff to improve efficiency and productivity by investing in new technology.
Training isn't a single event. Your employees should always be kept up-to-date on the latest security threats and information technology.
The Budget for Last Year Can Be Rolled Over Without an Audit
It may seem like the easiest thing to do, but this can significantly hinder growth. This is a bad idea because it needs to consider any business changes from year to year.
The business, company structure, and technology may all change from year to year.
These factors may alter IT requirements. Auditing your IT budget is one of the best things your company can do. This will help you know exactly what your budget includes and how to adjust it with every budget cycle.
You Are Not Paying Attention to Your Business Needs
The biggest mistake in budgeting for information technology is buying equipment and software that needs to meet their requirements.
Spending too much money on equipment that doesn't meet the requirements of the business can be a mistake.
It's crucial to know what you need before setting your budget. You should ask yourself whether the equipment you're buying suits your company today and can be easily adapted to meet changing needs.
Neglecting Cyber Security
Cybersecurity is a priority for IT budget planning, given the current surge of cyberattacks. The IT department is under increasing pressure to do more with less.
It is particularly true for cybersecurity budgets, which are more constrained than ever. Cybersecurity is more than just an IT cost. It's also a strategic decision that pays dividends beyond your imagination.
It can at least prevent you from incurring unnecessary costs. Cyberattacks have become more common than ever. Each one can cost an organization thousands of dollars in recovery costs.
Want More Information About Our Services? Talk to Our Consultants!
Conclusion
Budget planning for an Information Technology department can be a challenging task.
Before you come up with a solution, it is essential to consider many different factors. IT departments must budget effectively to continue supporting an expanding organization and meet their business requirements.
It is possible to achieve more by planning strategically and effectively. Infrastructure, platforms, and tools will be provided that allow for innovation and growth.
