Beating the Budget Blues

Larry Bonfante, Founder, CIO Bench Coach | 10/18/2013 | 50 comments

Larry Bonfante
On more than one occasion I have heard CIOs whine about how they are under a budget squeeze. The way we think about budgets and how we manage them and work with our teams to address budgetary issues will go a long way towards determining our success.

First of all, if you have a "C" in your title then you have a fiduciary responsibility to the organization. I always tell my clients that when you budget you should spend the money like it was your own, because if you are a senior executive of your company in essence the money is your own.

When looking at budgetary investments I don't believe in looking at them from a functional perspective but rather from a corporate perspective. Is this investment in an ERP system the best use of this money, or would we be better off investing it into a new marketing campaign or research and development effort? Every dollar we invest in technology is a dollar we are not investing in product development, sales, marketing, or a dozen other things that may potentially bring greater value and return on the investment. We can't be myopic and only look at this from a technology perspective.

Another exercise I suggest to my clients is to compare their prospective investments against the short list of things that truly matter to accomplishing the company's goals. Upgrading to the next version of some enterprise software may be a nice thing to do but how will it help us grow revenue or expand your foot print? If it doesn't align with the things that truly matter to your company why are you doing it? Of course, there are times when a technology does create a competitive advantage or may be end of life and no longer supportable. It's fine to invest in these cases but there should be a business case for the investment.

There should also be a business sponsor for the investment. If someone is not willing to stand up and ask for the money and serve as the face of the project and put skin in the game then perhaps it's not important enough to them to do the project. We don't do projects that don't have business sponsors who have a vested interest in the outcome of the effort. And for you wise guys out there, yes, even infrastructure projects have a business sponsor... that would be me.

Finally, we should be constantly looking for ways to become more efficient in operating our services so that the savings we glean from these efficiencies can be reinvested into driving innovation. How many of you have an innovation budget? If you do that's great. I don't. We have to fund our own skunk works innovation by finding dollars in operational efficiencies.

Budgeting is a fact of life. You can either embrace the challenge like a business executive or you can whine about it. The choice is yours.

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freespiritny25   Beating the Budget Blues   11/30/2013 12:36:48 PM
Re: Beating the Budget Blues
Budget always seems to be the underlying issue in the decision of an upgrade. The budget squeeze has become more of a concern these last few years and the com pany does suffer.
Susan Nunziata   Beating the Budget Blues   10/31/2013 6:49:54 PM
Re: present vs. future
@adil: preciesly. It's what I call a "non-strategic" approach to budgeting, and unfrotuantely it's all too common. 
shakeeb   Beating the Budget Blues   10/31/2013 11:10:15 AM
Re: present vs. future
@adil you are very true, it is important to segregate what falls under IT and what are other projects initiated from the business.
shakeeb   Beating the Budget Blues   10/31/2013 11:09:52 AM
Re: present vs. future
When IT projects are initiated it is important to look in to the budget aspect as well. If  the project is not within the budget it can be terminated at the initial stage rather than dragging it till the last moment.
adil   Beating the Budget Blues   10/31/2013 3:00:04 AM
Re: present vs. future
You are right Susan, I have seen companies are reluctant to allocate big budget for IT initiatives as its requirement is not understandable by approves sitting in the top positions. The may have the vision but they don't have the heart of taking big decisions. Allocating a reasonable amount at the right time will save them from a big cost after few years. So they should be ready to take bold decision and loosen their pockets while budgeting. It also happens when the budget is allocated to a department first and than their projects are aligned with respect to the allocated amount for the year rather it should be other way round.
singlemud   Beating the Budget Blues   10/29/2013 5:27:40 PM
Re: present vs. future
many time the "C" people are only looking at the budget on their side, CIO will spend all the money he has and will not consider to save some for CMO.
kstaron   Beating the Budget Blues   10/29/2013 2:42:40 PM
To the bone
So many places are scraping the budget bones at the moment. After delaying large purchases, upgrades, ect. how can you make the best of a budget that exists mainly for maintenace of existing systems? If you're stretched thin, what are you doing?
Susan Nunziata   Beating the Budget Blues   10/28/2013 11:57:15 PM
Re: present vs. future
@Adil: Your statement here is spot on:

One misconception which some people have is that they think of budgeting as a calculation task in fact it is more related to the vision of the people involved who will decide either it is feasible to spend it on marketing or base product.

In every case, budgeting has to be considered in context of the larger business goals. All too often I see companies get "pennywise and pound foolish," losing sight of the big-picture strategy because they're caught up in minutae in an effort save a few thousand dollars and ultimately undermine their own long-term potential to grow.
adil   Beating the Budget Blues   10/28/2013 4:51:53 AM
Re: present vs. future
@Susan: fortunately I am among those lucky ones who are working in such organizations. Budget making is a skill that has to be learned as the finances of the organization is at stake. I think the decision of where to invest should be thoroughly analyzed by both IT and business. For business initiatives there should be proper and detailed analysis meetings to understand the exact requirements because there are few cases when the business requirements are already addressed in an IT initiative. Secondly, the skills of the resources working from IT on this task also matters.

One misconception which some people have is that they think of budgeting as a calculation task in fact it is more related to the vision of the people involved who will decide either it is feasible to spend it on marketing or base product.
adil   Beating the Budget Blues   10/27/2013 3:32:08 AM
Re: present vs. future
@Sara: The initiative of the business falls under their own bucket. But where the initiatives are totally internal to IT they fall under IT books like in case of upgrading the middleware or database. These upgrades are also done to serve the business in terms of performance or security but still they are the one initiated by IT not against any business requirement. If we have a business view from a non IT driven organization perspective, in these organizations IT is eventually eating up the cost of the product/services that serve the entire business because they are not the earning had here.  IT is more for the business support there and budget is also allocated to IT to handle BAU. New implementations and support cost is normally charged to business.
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