Community IT Webinar Guidelines for Annual IT Budget
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This document provides an overview and guidelines for annual IT budgeting. It discusses why organizations should budget for IT, how to organize a budget into categories like personnel, hardware, software and services. It also discusses distinguishing between necessary and nice-to-have expenses as well as capital, operating and project expenditures. The document provides tips for looking ahead past the next year and questions to consider during the budgeting process. It concludes by showing a sample IT budget template.
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Community IT Webinar Guidelines for Annual IT Budget
- 1. Guidelines for Annual IT Budgeting Community IT Innovators Webinar October 22, 2015
- 2. Webinar Tips • Interact Ask questions via chat Connect on Twitter • Focus Avoid multitasking. You may just miss the best part of the presentation • Webinar Slides & Recording PowerPoint and recording links will be shared after the webinar
- 3. About Community IT Advancing mission through the effective use of technology. • Invested Work exclusively with nonprofit organizations, serving over 900 since 1993. • Strategic Help our clients make IT decisions that support mission. • Collaborative Team of over 30 staff who empower you to make informed IT choices.
- 4. Presenters Steve Longenecker Director, IT Consulting slongenecker@communityit.com Cedric Boyd Network Manager cboyd@communityit.com
- 5. Agenda • Why budget? • Organizing your budget • Looking ahead, past next year • Questions to ask during the budgeting process • Let’s look at a sample budget Image: Ken Teegardin, https://www.flickr.com/photos/teegardin/5537894072, www.SeniorLiving.Org
- 6. Why budget? • Anticipate organizational changes • Develop consensus on IT initiatives • Fit IT spending into larger context of organizational finances – create constraints • Prioritize options within IT spending constraints Image: Honoré Daumier - Online Collection of Brooklyn Museum; Photo: Brooklyn Museum, 2004, 53.166.2.jpg
- 7. Organizing your budget • Categories: Personnel, Hardware, Software, Services, Subscriptions • Run, Grow, Transform • Necessary vs. Nice To Have • Capital, Operating and Project Expenditures
- 8. Budget Categories • Personnel • Hardware • Software • Services Image: author is epSos.de from https://www.flickr.com/photos/epsos/5693012875, image cropped
- 9. Run, Grow, Transform Runners Image: Author is skeeze https://pixabay.com/en/runner-long-distance-fitness-557130/ Pumpkin Image: Author is Kam Abbott, https://www.flickr.com/photos/kams_world/4047724512 Chrysallis Image: Author is Sid Mosdell, https://www.flickr.com/photos/sidm/4813665260
- 10. Necessary vs. Nice To Have Water Glass Image Author S nova :https://commons.wikimedia.org/wiki/File:Glass_Half_Full_bw_1.JPG Lemonade Image: Author is PeteLinforth, https://pixabay.com/en/lemonade-can-pop-fizzy-drink-soda-684991/
- 12. Description Importance Urgency Time Network Migration / Remediation 95 95 80 Datawarehouse Consolidation 30 50 60 Program Prep 75 80 40 Client VPN Solution 50 60 30 Laptop Purchase/Image 80 40 40 Linux Server Replacement 90 90 30 Website support 85 50 20 IS Managing Director Hire 85 40 40 Systems Analyst Hire 100 100 20 SalesForce Support 70 40 20 Survey Options 30 40 10 IT Assessment / Budget 80 90 40 Office 365 - Email 60 30 100 Office 365 - Files 40 30 60 Office 365 - SharePoint 70 70 120 Office 2013 Deployment 60 60 50 Backup/Business Continuity 90 75 40 Server Room Cleanup 50 40 20
- 13. Capital, Operating and Project Expenditures Depending on Finance requirements, you may want to note each budget line item with a C, O, or P. ImageChris Potter https://www.flickr.com/photos/86530412@N02/7932571974
- 14. Looking ahead, past next year
- 15. Questions to ask when budgeting • Is my organization growing or shrinking (headcount)? • What are our peer organizations doing? • Are there changes to programs that will require IT changes? • What are my on-premise vs. cloud options • What is my organization’s tolerance for risk (downtime, IT failure, etc.) • What hardware is end-of-life? • What are IT pain points for the organization? • How will desired projects fit into our org’s overall operations?
- 16. Looking at a sample budget
- 17. Looking at a sample budget
- 18. Looking at a sample budget
- 19. Upcoming Webinar Office 2016 Thursday November 19 4:00 – 5:00 PM EST Mark Kraemer & Matthew Eshleman
- 20. Provide feedback Short survey after you exit the webinar. Be sure to include any questions that were not answered. Missed anything? Link to slides & recording will be emailed to you. Connect with us
- 21. Author: DuMont Television/Rosen Studios, New York-photographer, Uploaded by We hope at en.wikipedia http://commons.wikimedia.org/wiki/File:20_questions_1954.JPG
- 22. Resources • Donny Shimamoto – www.cgma.org/magazine/features/pages/20139263.aspx – www.journalofaccountancy.com/issues/2012/mar/2011443 9.html • www.cgma.org/magazine/news/pages/finance-it- collaboration-201512403.aspx
Notas do Editor
- Johan’s GTM starts recording after first slide change. Advance to second Title slide after hitting Record.
- Johan’s?
- Johan’s
- Johan, Steve and Cedric?
- Cedric’s What are some reasons behind budgeting? We will review methods of categorizing line items. We’ll take a look at 3 and 5 year budgeting Review some questions that will help guide the budgeting process Check out sample budgets
- Steve’s Why Budget? Sometimes “because you have to” is the answer. For organizations that are very strict in following budgets, without an approved IT budget there won’t be any IT spending. Sometimes organizations are very loose about spending – more like my household. My wife and I fly by the seat of our pants – should we get a new laptop? How much is in the bank? What other things do we think we might want to do with that $1200? Budgeting provides an opportunity to assess priorities as an organization and as an IT manager. It’s a process that should include stopping to “take stock” and consider the C/B’s of existing solutions and potential solutions. It’s also an opportunity to build consensus around IT spending. Admit that the bullet points are in some ways overlapping statements of the same idea: making thoughtful decisions with a large context in mind is always the goal. Sometimes that’s hard in the day to day grind. Budgeting is the accepted chance to take a step back and be thoughtful.
- Cedric’s– ( We’ll look at each bullet point on its own slide.) In creating the budget, grouping items using categories helps with understanding the context of each line item. While some items in theory could fall under more than one category, being consistent in organizing the budget is most important. Let’s take a closer look at these types organizational methods.
- Cedric’s Personnel – complete cost for employees. Roles such as Network Administrors or Engineers, IT Managers, Database Administrators, etc. Don’t forget training/certifications/conference or other associated costs. Even health benefits, not just salary, as it’s only part of the staff’s total costs. Hardware – servers, switches, printers, desktops, laptops, firewalls, cabling. Plus installation costs, plus maintenance contracts, plus warranties. Software – Microsoft Office, Blackbaud, Adobe… can pay for it upfront or it might be subscription based. Services – Consulting, outsourced IT support, Managed Service Provider (like Community IT), cloud backups - costs go here Like any human effort at categorizing, there is overlap in places where one could debate how to categorize. For example, if you get a new finance system and pay a consultant to help you implement - do you put that consultant’s time in the Software category (with the cost of the finance system’s licensing) or in the services category? Not important to us which you choose – just be consistent in your budget from year to year. Another example one is Software as a Service like Office 365. Is it software or is it a service?. Again, most important is consistency. (Though we might argue that the services category is for activities done for you by people that it is at least possible to hire an inhouse employee for. By that logic we’d put Software as a Service costs in the software cost.)
- Steve’s The Run, Grow, Transform framework origins – appears to originate in a Gartner article from 2008: https://www.gartner.com/doc/672507/simple-framework-translate-it-benefits 1. Run budget items keep the organization operating. Examples of Run budget items include mission-critical server replacements, key software upgrades and personnel costs associated with administering and maintaining the IT infrastructure on a day-to-day basis. Organizations that have to trim IT budgets should avoid cutting Run initiatives. Such cuts would introduce operational risk. If an organization already is going through a tough stretch, the last thing it needs is a server, application or network failure. 2. Grow budget items help the organization introduce new capabilities or improve existing ones. Grow initiatives could include the implementation of new software that makes operations more efficient, the purchase of a new firewall that provides additional protection from cyber threats or an upgrade of the organization’s website that improves interactivity with customers. Grow budget items should tie directly to the organization’s strategic initiatives. Grow initiatives usually are not as mission critical as Run initiatives and often have some time flexibility, which means that they are good candidates for starting early when additional cash is available, or for deferral if cash is tight. 3. Transform budget items are research- and-development-type activities. These initiatives might seek to identify, for example, the right technologies for new organizational capabilities; fundamental changes to business processes; or a new product or service offering. Examples of Transform initiatives include proof of concepts, prototypes and small-scale testing of new systems or business applications. - See more at: http://www.journalofaccountancy.com/issues/2012/mar/20114439.html#sthash.r07NNsIf.dpuf
- Cedric’s Going off the last slide, Run is probably always necessary. Grow and Transform are by their nature more optional – but we should critically evaluate and think about ROI (return on Investment) as we consider which of the initiatives we *might* invest in are our highest priorities and which would be nice, but which we could defer if grants, or donations, or whathaveyou don’t materialize. When finances are tight, transform initiatives often are the first to be cut or deferred— unless they are associated with key strategic initiatives that the organization views as essential to its continued operation. Even if the organization doesn’t deem certain Transform initiatives immediately essential, care should be taken when considering cutting or deferring them. That’s because Transform initiatives often are key to the organization’s long-term health. Failure to provide adequate resources to Transform initiatives can stunt an organization’s future success. Friend of Community IT Donny Shimamoto called those Run,Grow, Transform categproes “Run, Optimize, Innovate” in a guest webinar he did for Community IT a couple years ago. He recommends looking at the percentage breakdowns of your RGT. If all your IT budget is spent on “keeping the lights on” you may be underinvesting.
- Steve’s Another way of looking at the necessary vs. nice to have question. This is a classic four quadrant look at initiatives that might be under consideration for the next several years by an IT department. This is a chart that our CTO Matt Eshleman actually put togher a couple of years ago for our own organization. The size of the circle reflects the time required for the initiative, or its cost. Importance and urgency are sometimes confused but are not the same thing. Somethings have to be addressed immediately are the consquences will be immediate, but the consequences won’t be all that big a deal. “That last shared laptop is on its last legs and it’s gonna fail and when it does the intern isn’t going to have something to take notes on during the annual meeting” is urgent but may not be important (apologies to all interns- they always get picked on in these examples). Updating the organizations website may ultimately be very important – it’s the public face of the organization and you have data suggesting that the impression it gives has a direct impact on your fundraising – but you’ve been living with the current website for a while now and can live with it for longer if you need to. Obviously you want to focus on the upper right quadrant where things are Urgent AND Important.
- Steve’s Another way of looking at the necessary vs. nice to have question. This is a classic four quadrant look at initiatives that might be under consideration for the next several years by an IT department. The size of the circle is intended to reflect the size of the iniative, or its cost. Importance and urgency are sometimes confused but are not the same thing. Somethings have to be addressed immediately are the consquences will be immediate, but the consequences won’t be all that big a deal. “That last shared laptop is on its last legs and it’s gonna fail and when it does the intern isn’t going to have something to take notes on during the annual meeting” is urgent but may not be important (apologies to all interns- they always get picked on in these examples). Updating the organizations website may ultimately be very important – it’s the public face of the organization and you have data suggesting that the impression it gives has a direct impact on your fundraising – but you’ve been living with the current website for a while now and can live with it for longer if you need to. Obviously you want to focus on the upper right quadrant where things are Urgent AND Important.
- Cedric’s Capital expenses are technically defined as expenses related to investments that will deliver dividends beyond the fiscal year. Investments in HW or SW often fall into this category. Operating expenses are expenses related to day to day business processes – subscriptions, services, staffing compensation, maintenance costs, etc. are often in this category. Projects are special initiatives of a relatively short duration that have a start and stop. The cost for a project is sometimes “capitalized” but not always. Steve Interesting to note that for nonprofits, sometimes IT operating expenses are harder to “justify” because of a tradition of evaluating nonprofit “success” by how low they keep their overhead operational expenses compared to the money they put into programs. Somehow capital costs are outside this equation? This issue is especially apparent to us as consultants when we find a client leaning away from a SaaS (subscription based) solution that we consider superior to a similar on-premise solution (with hw/sw costs purchased upfront and capitalized) because the client prefers to avoid operational subscription costs. Cedric So when organizing, using methods such as categorizing along with the “Run, Grow, Transform” framework and understanding the expense types of Capital, Operating or Project helps in developing a clear, concise budget aligned with the organization IT goals. When planning a budget, however, organizational IT goals may (and should) extend past the upcoming fiscal year. Let’s take a look ahead, past next year.
- Steve’s 5 year budget plan allows us to see the life cycle costs of hw/sw investments. Most hw/sw life cycles are five years or less, so a five year budget should show the true cost of a hw/sw investment. The firewall costs $900 in year 1 (and that’s when a three year warranty is purchased also), but the firewall line item is empty for year 2. In year 3 is a two year warranty/support renewal, year 4 is empty again. Year 5 shows the replacement cost. Budgeting out five years also helps the budget process go easier as many line items are already predicted. That said, budgeting out five years is somewhat a speculative process. IT changes a lot in five years. So we’re putting out our expectations and we’re basing decisions for this year’s budget based on more than a one year outlook, but we’re tempering those expectations. It’s an educated guess? All that said, a 3 year budget may be more realistic and still gets at a lot of the advantages. The point is to push out beyond one year.
- Cedric’s Is my organization growing, shrinking (do I need to allow for changes in headcount)? -Expanding to another floor, moving to a larger office? -Downsizing or merging departments? What are our peer organizations doing? - Are there any worthwhile trends gaining traction that may improve our processes? Are there changes to programs that will require IT changes? - An on-premise service is now being replaced by a hosted service that provides better reliability, availability and improved functionality. Look at differences between on-premise and cloud options What is my organization’s tolerance for risk (downtime, IT failure, etc.) What hardware is end-of-life? What are IT pain points for the organization? This goes back to the point why budget in the first place? Budgeting allows you to plan for improvements that can be made in the future to help prevent paint points in the organization. How will desired projects fit into the overall operations of the organization?
- Steve’s? Handicapped because we can’t really show you another organization’s full budget without disclosing information that isn’t ours to share. Looking at a budget in great detail requires a time commitment we don’t have in a webinar. Community IT does a fair amount of budgeting for its clients and it’s a place where we can deliver a lot of value. It’s a little weird budgeting for your spending that goes into our revenue, and obviously there need to be checks and balances coming from the organization, but honestly it works well for a number of our clients.
- Cedric’s Contract term. This is only 3 years. $1500 per workstation ( and that’s hardware, not labor to deploy hardware) We’re looking at the “Equipment” category of the Run section of the budget.
- Cedric’s So we’ve shown three examples of budgets and talked about some of the ways in which categories.
- Johan
- Johan
- Johan Next slide lists questions from Carolyn…
- Cedric’s Is my organization growing, shrinking (do I need to allow for changes in headcount)? -Expanding to another floor, moving to a larger office? -Downsizing or merging departments? What are our peer organizations doing? Are there changes to programs that will require IT changes? Look at differences between on-premise and cloud options What is my organization’s tolerance for risk (downtime, IT failure, etc.) What hardware is end-of-life? What are IT pain points for the organization? How will desired projects fit into the overall operations of the organization?