With most organizations now in the fourth quarter of their fiscal year, the time has come to get serious about budget planning for 2020. As usual, the process is likely to be challenging for IT managers.
Historically, most organizations set aside a percentage of revenue and expect IT to keep spending within that range. According to a recent Deloitte study, companies on average spend 3.28 percent of their revenues for IT — less than half of the typical allocation for marketing.
Unsurprisingly, nearly half of U.S. CIOs say their budgets are inadequate. Although business leaders say they want IT to drive business growth, CIOs must spend most of their IT budgets just to maintain the status quo. After taking care of basics such as security updates, computer and server maintenance, software licensing, cloud services, telecommunications, staff salaries and outsourcing, there’s usually not a lot left over for innovation.
A major hurdle for CIOs is the persistent perception of IT as a cost center that doesn’t add to profitability. Non-technical executives might generally support IT initiatives, but they don’t always understand how specific budget requests will deliver improvements. This is frequently because IT leaders fail to make a convincing business case for spending, relying instead on industry-specific jargon and highly technical language during budget presentations.
The budget process provides an opportunity to change that perception. It gives IT managers an opportunity to educate the organization about IT’s strategic influence. It’s a chance to demonstrate technology’s pervasive role in every aspect of operations and, more important, how it creates value. Specifically, IT managers can make their case with these three points:
IT Creates Profit. Gartner analysts say digital transformation could be worth $18 trillion in added business value. But what does that mean? IT managers should be prepared to discuss actual use cases and explain how they can drive improved operations and increased profitability. One example might be an increased use of cloud services to improve profitability and customer satisfaction. For instance, it provides access to enterprise-grade data analytics tools you can use to better understand your customers, your markets and your supply chain.
IT Preserves Value. Using software to increase automation can preserve value by reducing the amount of time employees must spend on mundane and repetitious tasks such as data entry, invoicing and inventory updates. One study found that workers spend an average of 520 hours a year on repetitive tasks that could be easily automated. Based on an average hourly wage of $25.39, this translates to losses of $13,202.80 a year per employee on unproductive tasks.
IT Reduces Risk. Organizations often try to squeeze the last dollar of value out of their technology assets by holding on to them as long as possible. However, numerous studies find that that outdated technology can result in significant costs from downtime, lost productivity and increased maintenance. Worst of all, outdated technology is a prime target for cyberattacks. Investments in technology updates and upgrades reduce these risks.
IT budgeting is always a challenging process, but it does provide IT managers an opportunity to demonstrate how IT can facilitate business goals. Whether acquiring new customers, launching new products or streamlining operations, technology plays a central role. It’s up to IT managers to make sure that other business leaders get the message.