IT Budget Aligned With Company Priorities?
When technology professionals submit an IT budget, the expenditures tend to garner considerable scrutiny. That’s largely because many items in an IT budget are less tangible and more challenging to link to company goals than some others.
For example, when a construction company foreperson submits a budget, it’s typically filled with items you can touch. Tools such as nail guns, air compressors, and drills, enjoy a direct cognitive link to business goal achievement. Budget line items such as software, firewalls, and Virtual Private Networks, do not necessarily appear as closely related to company priorities. In reality, nothing could be further from the truth.
Although IT budgets are chock full of items you cannot hold in your hand, they are just as vital to goal achievement as a carpenter’s hammer. But the challenge going forward will be tightening the relationship between IT budgets and priorities as companies look to streamline expenses.
Emerging IT Budgetary Challenges
It’s not uncommon for CFOs to have a broad framework for departmental budget expectations. This will typically be driven by the prior year’s success or challenges. Coming off unexpected downturns routinely have decision-makers looking to cut costs across the board. Explaining why IT should expand and not contract may be an uphill debate, but one necessary to maintain technical proficiency and ensure cybersecurity. These are logical steps that can be articulated to demonstrate why IT budgets must remain robust to support company priorities.
- Highlight Budget Goals and Company Priorities
- Highlight Related IT Expenditures to Goal Achievement
- Drill Down on IT Necessities that Link Spending with Priorities
- Indicate How IT Budgets Prove Cost-Effective
Most technology budgets tend to increase year-over-year because they drive workforce productivity and connectivity. There’s little doubt that IT now forms a foundation for goal achievement. But following times of economic disruption, CFOs may be less receptive to another uptick.
Industry IT Budgets by the Numbers
Recent Deloitte Insights data indicates that only 2 percent of companies increased their IT increases from 2015 to 2018. The following sector investment breakdown of total revenue investment points to underfunded IT and business priorities by extension.
- Banking & Securities: 7.88 percent
- Technology & Telecommunications: 6.47 percent
- Insurance: 4.8 percent
- Business & Professional Services: 4.64 percent
- Education & Non-Profit Organizations: 4.54 percent
- Travel, Media & Hospitality: 4.44 percent
- Health Care Services: 4.26 percent
- Energy & Resources: 2.31 percent
- Manufacturing: 2.14 percent
- Consumer Business & Retail: 2.03 percent
- Construction & Infrastructure: 1.68 percent
According to the Deloitte data, the average IT budget across industries stands at 3.64 percent. While that seems like a frighteningly low investment threshold, the line-item detail proves even less inspirational in terms of goal achievement.
“Many CIOs describe a significant gap between business leadership’s expectations of IT and corresponding financial support. Seventy-two percent of CIOs say projects that are most appealing to CEOs and executive leadership are those that generate revenue or focus on innovation and emerging technology,” the Deloitte report states. Yet the average IT department invests more than half (55 percent) of its technology budget on maintaining business operations and only 19 percent on building innovative new capabilities.”
Making a case for innovation investment maybe the pressure point advocates require to get entrepreneurs, CEOs, and other decision-makers on board with leveraging IT budgets to increase profit-driving priorities and capital expenditure reductions.
For example, organizations that recently increased their remote workforce capabilities have a golden opportunity to continue work-from-home strategies. This, in turn, hands CFOs a sound reason to eliminate expenses associated with brick-and-mortar facilities and in-house networks. When making a case for IT innovation, such investments typically lower overall expenses while delivering on company priorities.