Create a Transparent and

Defensible IT Budget

Build in approvability from the start.

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Table of
Contents
3 Executive Brief
19 Phase 1: Lay Your Foundation
49 Phase 2: Get Into Budget-Starting Position
70 Phase 3: Develop Your Forecasts
91 Phase 4: Build Your Proposed Budget
105 Phase 5: Create and Deliver Your Presentation
130 Next Steps

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Create a Transparent and
Defensible IT Budget
Build in approvability from the start.

EXECUTIVE BRIEF
Analyst
Perspective
A budget’s approvability is about It’s that time of year again – budgeting. Most organizations invest a lot of time and effort
in a capital project selection process, tack a few percentage points onto last year’s OpEx,
transparency and rationale, not the size of do a round of trimming, and call it a day. However, if you want to improve IT financial
the numbers. transparency and get your business stakeholders and the CFO to see the true value of IT,
you need to do more than this.
Your IT budget is more than a once-a-year administrative exercise. It’s an opportunity to
educate, create partnerships, eliminate nasty surprises, and build trust. The key to doing
these things rests in offering a range of budget perspectives that engage and make sense to
your stakeholders, as well as providing iron-clad rationales that tie directly to
organizational objectives.
The work of setting and managing a budget never stops – it’s a series of interactions,
conversations, and decisions that happen throughout the year. If you take this approach to
budgeting, you’ll greatly enhance your chances of creating and presenting a defensible
annual budget that gets approved the first time around.

Jennifer Perrier
Principal Research Director
IT Financial Management Practice
Info-Tech Research Group

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Executive Summary
Your Challenge Common Obstacles Info-Tech’s Approach
IT struggles to gain budget approval year after Internal and external obstacles beyond IT’s control CIOs need a straightforward way to create and
year, largely driven by a few key factors: make these challenges even harder to overcome: present an approval-ready budget.
• For a long time, IT has been viewed as a cost • Economic pressures can quickly drive IT’s • Info-Tech recognizes that connecting the dots to
center whose efficiency needs to be increasingly budgetary focus from strategic back to tactical. demonstrate value is key to budgetary approval.
optimized over time. IT’s relationship to
• Corporate-driven categorizations of • Info-Tech also recognizes that key stakeholders
strategy is not yet understood or established in
expenditure, plus disconnected approval require different perspectives on the IT budget.
many organizations.
mechanisms for capital vs. operational spend,
• This blueprint provides a framework, method,
• IT is one of the biggest areas of cost for many hide key interdependencies and other aspects of
and templated exemplars for creating and
organizations. Often, executives don’t IT’s financial reality.
presenting an IT budget to stakeholders. It will
understand, or even believe, that all that IT
• Connecting the dots between IT activities and speed the approval process and ensure more of
spending is necessary to advance the
business benefits rarely forms a straight line. it is approved.
organization’s objectives, let alone keep it
running.

Info-Tech Insight
CIOs need a straightforward way to create and present an approval-ready IT budget that demonstrates the value IT is delivering to the business and
speaks directly to different stakeholder priorities.

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 IT struggles to get budgets approved due to low transparency
and failure to engage
Administrative Visibility Relationship
Capability challenges Operating challenges
challenges challenges challenges

Economic pressures drive

The vast majority of IT’s Most business leaders Other departments in the
IT is seen as a cost center, knee-jerk redirection of
IT leaders are not seen as real-life expenditure is in the don’t know how many IT organization see IT as a
not an enabler or driver of IT’s budgetary focus from
business leaders. form of operating expenses resources their business units competitor for funding, not
business strategy. strategic initiatives back to
i.e. keeping the lights on. are really consuming. a business partner.
operational tactics.

Lack of transparency
IT leaders don’t have Outmoded finance IT absorbs unplanned spend
IT and the business IT and the business don’t
sufficient access to department expenditure because business leaders The business doesn’t
have meaningful
aren’t speaking the same information about, or categorizations don’t don’t realize or consider understand what IT is, what
conversations about IT costs,
language. involvement in, business accommodate IT’s real cost the impact of their it does, or what it can offer.
opportunities, or investments.
decisions and objectives. categories. decisions on IT.

Defining and demonstrating IT leaders may not have the CapEx and OpEx approval IT activities usually have The relationship between
Much of IT, especially
financial literacy or acumen and tracking mechanisms an indirect relationship IT spending and how it
the value of IT and its infrastructure, is invisible to
needed to translate IT are handled separately with revenue, making value supports achievement of
investments isn’t the business and is only
activities and needs into when, in reality, they’re calculations more business objectives is
straightforward. noticed if it’s not working.
business terms. highly interdependent. complicated. not clear.

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Reflect on the numbers Perception of improvement required in aligning the IT budget
with the business

Cost and budget management

CXOs and CIOs
agree that the IT
budget alignment
needs improvement

Cost optimization IT staff have

Intensity of business frustration with perceived
doubts about IT’s
IT failure to deliver value
financial
management
effectiveness

Business value
Both IT and the
business feel more
pain than not about
IT’s delivery of
business value

Source for above charts: Info-Tech Research Group, Source for above charts: Info-Tech Research Group,
IT Management & Governance Diagnostic, Jan-Dec 2022, n=211. CEO-CIO Alignment Diagnostic, Jan-Dec 2022, n=76.
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To move forward, first you need to get unstuck
Today’s IT budgeting challenges have been growing for a long time. Overcoming these challenges means
untangling yourself from the grip of the root causes.

Principle 1: Principle 2: Principle 3:

IT and the business are fighting diverging Different stakeholders have different Connecting the dots to clearly demonstrate
forces. Technology has changed perspectives on your IT budget. Learn and IT’s value to the organization is the key to
monumentally, while financial management acknowledge what’s important to them so budgetary approval. But those connected
hasn’t changed much at all. that you can potentially deliver it. dots don’t always result in a straight line.

The three principles above are all about IT’s changing relationship to the business. IT leaders need a
systematic and repeatable approach to budgeting that addresses these principles by:
• Clearly illustrating the alignment between the IT budget and business objectives.
• Showing stakeholders the overall value that IT investment will bring them.
• Demonstrating where IT is already realizing efficiencies and economies of scale.
• Gaining consensus on the IT budget from all parties affected by it.

“The culture of the organization will drive your

success with IT financial management.”
– Dave Kish, Practice Lead, IT Financial Management Practice, Info-Tech Research Group
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Info-Tech’s approach
The Info-Tech difference:
CIOs need a straightforward way to convince approval-granting CFOs, CEOs,
This blueprint provides a framework,
boards, and committees to spend money on IT to advance the organization’s
method, and templated exemplars for
strategies. building and presenting your IT budget to
different stakeholders. These will speed
the approval process and ensure that a
higher percentage of your proposed spend
is approved.

IT budget approval cycle

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Info-Tech’s methodology for how to create a transparent and
defensible it budget
1. Lay Your Foundation 2. Get Into Budget- 3. Develop Your 4. Build Your Proposed 5. Create and Deliver
Starting Position Forecasts Budget Your Budget Presentation

Phase 1. Understand budget 1. Gather your data 1. Develop alternate 1. Aggregate your 1. Plan your presentation
steps purpose 2. Review historical scenarios forecasts content
2. Know your performance 2. Develop project CapEx 2. Stress-test your 2. Build your budget
stakeholders 3. Set budget goals forecasts forecasts presentation
3. Continuously pre-sell 3. Develop non-project 3. Challenge and perfect 3. Present, finalize, and
your budget CapEx and OpEx your rationales submit your budget
forecasts
Phase An understanding of your Information and goals for Completed forecasts for A final IT budget for An IT budget
outcomes stakeholders and what planning next fiscal project and non-project proposal including presentation.
your IT budget means to year’s IT budget. CapEx and OpEx. scenario-based
them. alternatives.

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Insight
summary Overarching insight: Create a transparent and defensible IT budget
CIOs need a straightforward way to create and present an approval-ready IT budget that demonstrates the value
IT is delivering to the business and speaks directly to different stakeholder priorities.

Phase 1 insight: Phase 2 insight: Phase 3 insight:

Lay your foundation Get into budget-starting Develop your forecasts
position
IT needs to step back and look at Forecasting costs according to a
it’s budget-creation process by Presenting your proposed IT range of views, including CapEx
first understanding exactly what a budget in the context of past IT vs. OpEx and project vs. non-
budget is intended to do and expenditure demonstrates a project, and then positioning it
learning what the IT budget means pattern of spend behavior that is according to different stakeholder
to IT’s various business fundamental to next year’s perspectives, is key to creating a
stakeholders. expenditure rationale. transparent budget.

Phase 4 insight: Phase 5 insight:

Build your proposed budget Create and deliver your budget presentation
Selecting the right content to present to your various
Fine-tuning and hardening the rationales behind every stakeholders at the right level of granularity ensures
aspect of your proposed budget is one of the most that they see their priorities reflected in IT’s budget,
important steps for facilitating the budgetary approval driving their interest and engagement in IT financial
process and increasing the amount of your budget that concerns.
is ultimately approved.

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Key deliverable Blueprint deliverables
Each step of this blueprint is accompanied by supporting deliverables to help
you accomplish your goals:

IT Budget
Executive Presentation IT Cost Forecasting and
Budgeting Workbook
Phase 5: Create a focused presentation
This Excel tool allows you to capture and
for your proposed IT budget that will
work through all elements of your IT
engage your audience and facilitate
forecasting from the perspective of
approval.
multiple key stakeholders and generates
compelling visuals to choose from to
populate your final executive
presentation.

Also download this completed sample:

Sample: IT Cost Forecasting and Budgeting Workbook

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Blueprint benefits

IT benefits Business benefits

• Improve IT’s overall financial management capability. • Better understand the different types of expenditure occurring in
IT, including project CapEx, non-project CapEx, and non-project
• Streamline the administration of annual IT budget development.
OpEx.
• Legitimize the true purpose and value of IT operations and
• Gain insight into the relationship between one-time CapEx on
associated expenditure.
ongoing OpEx and its ramifications.
• Create visibility on the part of both IT and the business into IT’s
• See business priorities and concerns clearly reflected in IT’s
mandate, what needs to be in place, and what it costs to fund it.
budget down to the business-unit level.
• Foster better relationships with business stakeholders by
• Receive thorough return on investment calculations and cost-
demonstrating IT’s business and financial competency, working
benefit analyses for all aspects of IT expenditure.
in partnership with business leaders on IT investment decisions,
and building mutual trust. • Understand the direct relationship between IT expenditure and the
depth, breadth, and quality of IT service delivery to the business.

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Measure the value of this Value you will receive:
blueprint 1. Increased forecast accuracy through using a
sound cost-forecasting methodology.
2. Improved budget accuracy by applying more
Ease budgetary approval and improve its accuracy. thorough and transparent techniques.

• Percentage of budget approved: Target 95% 3. Increased budget transparency and

Near-term completeness by soliciting input earlier and
goals
• Percentage of IT-driven projects approved: Target 100% validating budgeting information.
• Number of iterations/re-drafts required to proposed budget: One iteration
Long-term
4. Stronger alignment between IT and enterprise
goal
• Variance in budget vs. actuals: Actuals less than budget and within 2% goals through building a better understanding of
the business values and using language they
understand.
In Phases 1 and 2 of this blueprint, we will help you
understand what your approvers are looking for and gather 5. A more compelling budget presentation by
offering targeted, engaging, and rationalized
the right data and information. information.
In Phase 3, we will help you 6. A faster budgeting rework process by
forecast your IT costs it terms of addressing business stakeholder concerns the
four stakeholder views so you can first time.
craft a more meaningful IT budget
narrative.

In Phases 4 and 5, we will help you build a targeted

presentation for your proposed IT budget.
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An analogy
“A budget isn’t like a horse and cart – you can’t get in front of it or behind it like that.
It’s more like a river…
When developing an annual budget, you have a good idea of what the OpEx will be –
last year’s with an annual bump. You know what that boat is like and if the river can
handle it.
But sometimes you want to float bigger boats, like capital projects. But these boats don’t
start at the same place at the same time. Some are full of holes. And does your river even
have the capacity to handle a boat of that size?
Some organizations force project charters by a certain date and only these are included in
the following year’s budget. The project doesn’t start until 8-12 months later and the
charter goes stale. The river just can’t float all these boats! It’s a failed model. You have
to have a great governance processes and clear prioritization so that you can dynamically
approve and get boats on the river throughout the year.”
– Mark Roman, Managing Partner, Executive Services,
Info-Tech Research Group and Former Higher Education CIO

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Info-Tech offers various levels of support
to best suit your needs

Guided Implementation
DIY Toolkit Workshop Consulting
“Our team has already made this “Our team knows that we need to “We need to hit the ground “Our team does not have the time
critical project a priority, and we fix a process, but we need running and get this project or the knowledge to take this
have the time and capability, but assistance to determine where to kicked off immediately. Our project on. We need assistance
some guidance along the way focus. Some check-ins along the team has the ability to take this through the entirety of this
would be helpful.” way would help keep us on over once we get a framework project.”
track.” and strategy in place.”

Diagnostics and consistent frameworks are used throughout all four options.

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Guided Implementation
A Guided
What does a typical GI on this topic look like? Implementation (GI) is a
series
Phase 1: Phase 2: Phase 3: Phase 4: Phase 5: Create
of calls with an Info-
Lay Your
Foundation
Get Into
Budget-
Develop Your
Forecasts
Build Your
Proposed
and Deliver Your
Budget
Tech analyst to help
Starting Budget Presentation implement our best
Position
practices in your
organization.
Call #1: Call #2: Call #4: Call #6: Call #7:
Discuss the IT Review data Review project Review Identify
budget, requirements CapEx proposed presentation A typical GI is 8 to 12
processes, and for transparent
stakeholders budgeting.
forecasts. budget logic inclusions and calls over the course of
and rationales. exclusions.
in the context 4 to 6 months.
of your unique Call #3: Set Call #5: Call #8:
organization. budget goals Review non- Review final
and process project CapEx budget
improvemen and OpEx presentation.
t metrics. forecasts.

Info-Tech
Info-Tech Research
Research Group| 17
Group | 17
 Workshop Overview Contact your account representative for more information.
[email protected] 1-888-670-8889

Day 1 Day 2 Day 3 Day 4 Day 5

Get into budget-starting Forecast project CapEx Forecast non-project CapEx Finalize budget and develop Next Steps and
position and OpEx presentation Wrap-Up (offsite)
1.1 Review budget purpose. 2.1 Review the ITFM Cost 3.1 Review non-project capital 4.1 Aggregate forecast totals 5.1 Complete in-progress
Model. and costs. and sanity check. deliverables from previous
1.2 Understand stakeholders
four days.
and approvers. 2.2 List projects. 3.2 Review non-project 4.2 Generate graphical outputs
Activities

operations and costs. and select content to 5.2 Set up review time for
1.3 Gather your data. 2.3 Review project proposals
include in presentation. workshop deliverables and
and costs. 3.3 Map and tally total non-
1.4 Map and review historical to discuss next steps.
project CapEx and OpEx. 4.3 Fine tune rationales.
financial performance. 2.4 Map and tally total project
CapEx. 3.4 Develop and/or confirm 4.4 Develop presentation and
1.5 Rationalize last year’s
proposed expenditure write commentary.
variances. 2.5 Develop and/or confirm
rationales.
project-business alignment,
1.5 Set next year’s budget
ROI, and cost-benefit
targets.
statements.

1. Budget process and culture 1. Forecasted project-based 1. Forecasted non-project- 1. Final proposed IT budget for 1. Completed IT Budget
assessment. capital expenditure mapped based capital expenditure next fiscal year. Executive Presentation.
against the four views of the and operating expenditure
Deliverables

2. Stakeholder alignment 2. Plan and build content for IT

ITFM Cost Model. against the four views of the
assessment and pre-selling Budget Executive
ITFM Cost Model.
strategy. Presentation.
3. Mapped historical
expenditure.
4. Next fiscal year’s budget
targets.

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Phase 1
Lay Your Foundation

Lay Your Get Into Budget-Starting Develop Your Build Your Create and Deliver Your
Foundation Position Forecasts Proposed Budget Presentation
1.1 Understand what your budget 2.1 Assemble your resources 3.1 Develop assumptions and 4.1 Aggregate your numbers 5.1 Plan your content
is alternative scenarios
2.2 Understand the four views of 4.2 Stress test your forecasts 5.2 Build your presentation
and does
the ITFM Cost Model 3.2 Forecast your project CapEx
4.3 Challenge and perfect your 5.3 Present to stakeholders
1.2 Know your stakeholders
2.3 Review last year’s budget vs. 3.3 Forecast your non-project rationales
5.4 Make final adjustments and
1.3 Continuously pre-sell your actuals and five-year historical CapEx and OpEx
submit your IT budget
budget trends
2.4 Set your high-level goals

This phase will walk you through the following Create a Transparent and
activities:
This phase involves the following participants: Defensible IT Budget
• Seeing your budget as a living governance tool
• Head of IT
• Understanding the point of view of different
• IT Financial Lead
stakeholders
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• Gaining tactics for setting future IT spend expectations • Other IT Management
Lay Your Foundation

Before starting any process, you need to understand exactly why

“IT finance is more than budgeting. It’s
you’re doing it.
about building trust and credibility in
This phase is about understanding the what, why, and who of your IT budget. where we’re spending money, how
• Understand what your budget is and does. A budget isn’t just an annual administrative we’re spending money. It’s about
event – it’s an important governance tool. Understand exactly what a budget is and your
budgetary accountabilities as an IT leader. relationships. It’s about financial
• Know your stakeholders. The CFO, CEO, and CXOs in your organization have their own
responsibility, financial accountability. I
priorities, interests, and professional mandates. Get to know what their objectives are and rely on my entire leadership team to all
what IT’s budget means to them.
understand what their spend is. We are a
• Continuously pre-sell your budget. Identifying, creating, and capitalizing on opportunities steward of other people’s money.”
to discuss your budget well in advance of its formal presentation will get influential
stakeholders and approvers on side, foster collaborations, and avoid unpleasant surprises
on all fronts. – Rick Hopfer, CIO, Hawaii Medical Service Association

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What does your budget actually do?
A budget is not just a painful administrative exercise that you go through once a year.

Most people know what a budget is, but it’s important to understand its “CFOs are not thinking that they
true purpose and how it’s used in your organization before you engage want to shut down IT spend.
in any activity or dialogue about it.
Nobody wants to do that.
In strictly objective terms: I always looked at things in
terms of revenue streams –
• A budget is a calculated estimate of income vs. expenditure for a
period in the future, often one year. Basically, it’s an educated guess where the cash inflow is
about how much money will come into a business entity or unit and coming from, where it’s going
how much money will go out of it. to, and if I can align my cash
• A balanced budget is where income and expenditure amounts are outflows to my revenue stream.
equal. Where I always got suspicious
• The goal in most organizations is for the income component of the as a CFO is if somebody
budget to match or exceed the expenditure component. can’t articulate spending
If it doesn’t, this results in a deficit that may lead to debt. in terms of a revenue stream.
I think that’s how most
CFOs operate.”
Simply put, a budget’s fundamental purpose is to plan and communicate how an organization
– Carol Carr, Technical Counselor,
will avoid deficit and debt and remain financially viable while meeting its various
Info-Tech Research Group and Former CFO
accountabilities and responsibilities to its internal and external stakeholders.

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Put your IT budget in context
Your IT budget is just one of several budgets across your organization that, when combined, create an
organization-wide budget. In this context, IT is in a tough spot.

It’s a competition: The various units in your organization are

competing for the biggest piece they can get of the limited projected
income pie. It’s a zero-sum game. The organization’s strategic and Contextual metrics like IT spend as a percentage of revenue, IT OpEx
operational priorities will determine how this projected income is as a percentage of organizational OpEx, and IT spend per
divvied up. organizational employee are important baseline metrics to track
Direct-to-revenue units win: Business units that directly generate around your budget, internally benchmark over time, and share, in
revenue often get bigger relative percentages of the organizational order to illustrate exactly where IT fits into the broader organizational
budget since they’re integral to bringing in the projected income part picture.
of the budget that allows the expenditure across all business units to
happen in the first place.
Indirect-to-revenue units lose: Unlike sales units, for example,
IT’s relationship to projected income tends to be indirect, which
means that IT must connect a lot more dots to illustrate its positive
impact on projected income generation.
In financial jargon, IT really is a cost center: This indirect
relationship to revenue also explains why the focus of IT budget
conversations is usually on the expenditure side of the equation,
meaning it doesn’t have a clear positive impact on income.

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Budgeting isn’t a once-a-year thing
Yet, many organizations treat it like a “one and done” point of annual administration. This is a mistake that
misses out on the real benefits of budgeting.
Many organizations have an annual budgeting and planning event that takes place during the back half of the fiscal year. This is when all formal
documentation around planned projects and proposed spend for the upcoming year is consolidated, culminating in final presentation, adjustment, and
approval. It’s basically a consolidation and ranking of organization-wide priorities at the highest level.

If things are running well, this culmination point in the overall budget development and management
process is just a formality, not the beginning, middle, and end of the real work. Ideally:
• Budgets are actually used: The whole organization uses budgets as tools to actively manage day-to-day “A well-developed and presented
operations and guide decision making throughout the year in alignment with priorities as opposed to budget should be the numeric
something that’s put on a shelf or becomes obsolete within a few months. manifestation of your IT strategy that’s
• Interdependencies are evident: No discrete area of spend focus is an island – it’s connected directly or
well communicated and understood by
indirectly with other areas of spend, both within IT and across the organization. For example, one server your peers. When done right, budgets
interacts with multiple business applications, IT and business processes, multiple IT staff, and even should merely affirm what’s already
vendors or external managed service providers. Cost-related decisions about that one server – maintain, been understood and should get
repurpose, consolidate, replace, discard – will drive other areas of spend up or down. approved with minimal pushback.”
• There are no surprises: While this does happen, your budget presentation isn’t a great time to bring up a – Patrick Gray, TechRepublic, 2020
new point of significant spend for the first time. The items in next year’s proposed budget should be
priorities that are already known, vetted, supported, and funded.

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Understand your budgetary responsibilities as the IT leader

It’s in your job description. For some stakeholders, it’s the most important part of it.
While not a contract per se, your IT budget is an objective When it comes to your budget (and all things financial), your job is to
and transparent statement made in good faith that shows: be ethical, careful, and wise:
• You know what it takes to keep the organization viable. 1. Be honest. Business ethics matter.
• You understand the organization’s accountabilities and 2. Be as accurate as possible. Your expenditure predictions won’t be perfect,
responsibilities as well as those of its leaders. but they need to be best-effort and defensible.
• You’re willing and able to do your part to meet these 3. Respect the other players. They have their own roles, motivations, and
accountabilities and responsibilities. mandates. Accept and respect these by being a supporter of their success
instead of an obstacle to them achieving it.
• You know what your part of this equation is, as well as what
parts should and must be played by others. 4. Connect the dots to income. Always keep the demonstration of business
value in your sights. Often, IT can’t draw a straight line to income, but
demonstrating how IT expenditure supports and benefits future, current,
and past (but still relevant) business goals and strategies, which in turn
affect income, is the best course.
5. Provide alternatives. There are only so many financial levers your
organization can pull. An action on one lever will have wanted and
unwanted consequences on another. Aim to put financial discussions in
terms of risk-focused “what if” stories and let your business partners
decide if those risks are satisfactory.
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Budgeting processes tend to be similar – it’s budgeting
cultures that drive differences
The basic rules of good budgeting are the same everywhere. Bad budgeting processes, however, are usually
caused by cultural factors and can be changed.
What’s the same everywhere… What’s unchangeable… What’s changeable…
For right or wrong, most budgeting processes There are usually only three things about an Budgeting processes are rarely questioned. It
follow these general steps: organization’s budgeting process that are never occurs to most people to challenge this
untouchable and can’t be changed: system, even if it doesn’t work. Who wants to
1. Capital project vetting and selection for the challenge the CFO? No one.
next fiscal year starts three-to-six months 1. The legal and regulatory mandates that
before the end of the current fiscal year. govern financial funding, accounting, and Review your organization’s budgeting culture to
reporting practices. These are often specific discover the negotiable and non-negotiable
2. Operational expenditure, including salaries, to industries and spend types. constraints. Specifically, look at these
is looked at later with much less formality potentially-negotiable factors if they’re
and scrutiny with an aim to cut. 2. The accounting rules your organization obstacles to IT budgeting success:
follows, such as GAAP, or IFRS. These too
3. Each business unit does a budget may be legally mandated for government • Timeframes and deadlines
presentation and makes directed entities and publicly-traded companies.
amendments (usually trimming). • Order of operations
3. Hard limits on the projected available • Areas of focus (CapEx vs. OpEx)
4. The approved budget numbers are plugged income the CFO has to distribute.
into a standard, sub-optimal budget template • Funding sources and ownership
provided by Finance. • Review/approval mechanisms
• Templates and tools
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1.1 Review your budgeting process and culture
1 hour
1. Review the following components of your budget process using the business case pitches? Is IT appropriately included in business case
development? Is there any benefit to implementing show-back or
questions provided for each as a guideline.
charge-back?
a) Legal and regulatory mandates. What are the external rules that g) Review/approval mechanisms. Are strategies and priorities used to
govern how we do financial tracking and reporting? How do they rank
manifest in our processes? proposed spend clear and well communicated? Are spend approvers
b) Accounting rules used. What rules does our finance department use objective in their decision making? Do different approvers apply the
and why? Do these rules allow for more meaningful representations of same
IT spend? Are there policies or practices in place that don’t appear to standards and tools?
be backed by any external standards? h) Templates and tools. Are the ones provided by Finance, the PMO,
c) Timeframes and deadlines. Are we starting the budgeting process and
too late? Do we have enough time to do proper due diligence? Will other groups sufficient to document what we need to document? Are
expenditures approved now be out of date when we go to execute? they
Are there mechanisms to update spend plans mid-cycle? accessible and easy to use? Are they automated and integrated so we
only have to enter data once?
d) Order of operations. What areas of spend do we always look at first,
such as CapEx? Are there any benefits to changing the order in which 2. On the slide following these activity instructions, rate how effective each
we do things, such as examining OpEx first? of the above is on a scale of 1-10 (where 10 is very effective) in
supporting the budgeting process. Note specific areas of challenge and
e) Areas of focus. Is CapEx taking up most of our budgeting cycle time?
opportunity for change.
Are we spending enough time examining OpEx? Is IT getting enough
time from the CFO compared to other units?
f) Funding sources and ownership. Is IT footing most of the
technology bills? Are business unit leaders fronting any technology
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1.1 Review your budgeting process and culture

Input Output Materials Participants

• Organizational knowledge of • Rated assessment of your • Whiteboard/flip charts • Head of IT

typical budgeting processes organization’s budget
• IT Financial Lead
process and culture, as well
• Copies of budgeting
as major areas of challenge • Other IT Management
policies, procedures, and
and opportunity for change
tools

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Budget process and culture assessment
Document the outcomes of your assessment. Examples are provided below.
Budgeting area of Rating
1 = very ineffective Challenges Opportunities for change
assessment 10 = very effective
Create, communicate, and train management on
Significant regulation but compliance steps not clear
Legal and regulatory mandates 7 compliance procedures and align the financial
or supported within departments.
management tools accordingly.
Learn more about them and their provisions to see if
Accounting rules 6 IT not very familiar with them.
IT spend can be better represented.
Finalize capital project plans for next fiscal four Explore flexible funding models that allow changes
Timeframes and deadlines 5
months before end of current fiscal. to budget closer to project execution.
Setting CapEx before OpEx leads to paring of Establish OpEx first as a baseline and then top up to
Order of operations 3
necessary OpEx based on CapEx commitments. target budget with CapEx.
Lack of focus on OpEx means incremental Perform zero-based budgeting on OpEx every few
Areas of focus 6
budgeting – we don’t know what’s in there. years to re-rationalize this spend.
IT absorbing unplanned mid-cycle spend due to Implement a show-back mechanism to change
Funding sources and ownership 4
impact of unknown business actions. behavior or as precursor to limited charge-back.
CFO is fair and objective with information presented Improve business sponsorship/fronting of new
Review/approval mechanisms 8
but could demand more evidence. initiative business cases and IT partnership
Finance budget template largely irrelevant and Adjust account buckets over a period of time,
Templates and tools 2
unreflective of IT: only two relevant categories. starting with SW/HW and cloud breakouts.
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Receptive audiences make
communication a lot easier
To successfully communicate anything, you need to be
heard and understood.
The key to being heard and understood is first to hear and understand the perspective of the
people you’re trying to communicate with – your stakeholders. This means asking some
questions:
• What context are they operating in?
• What are their goals and responsibilities? There are certain principles,
• What are their pressures and stresses? mandates, and priorities that drive
• How do they deal with novelty and uncertainty?
• How do they best take in information and learn?
your stakeholders; they’ll want to
The next step of this blueprint shows the perspectives of IT’s key stakeholders and how they’re see these reflected in you, your
best able to absorb and accept the important information contained in your IT budget. You will:
work,
• Learn a process for discovering these stakeholders’ IT budget information needs within the
context of your organization’s industry, goals, culture, organizational structure, and your budget.
personalities, opportunities, and constraints.
• Document key objectives and messages when communicating with these various key
stakeholders.

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Your IT budget means different things to different
stakeholders
Info-Tech’s ITFM Cost Model lays out what matters most from various points of view.

Info-Tech Research Group | 30

The CFO: Understand their role
The CFO is the first person that comes to mind in dealing with budgets. They’re personally and professionally on
the line if anything runs amiss with the corporate purse.
What are the CFO’s role and responsibilities? What’s important to the CFO?
• Tracking cash flow and balancing income with expenditures.
Costs Compliance Reason
• Ensuring fiscal reporting and legal/regulatory compliance.
Benefits Risk Management Rationale
• Working with the CEO to ensure financial-strategic alignment.
• Working with business unit heads to set aligned budgets. Value Strategic alignment Clarity
• Seeing the big picture.
Analysis Control Objectivity
“Often, the CFO sees IT requests as overhead rather than a need. And Efficiency Effectiveness
they hate increasing overhead.”
Return on investment
– Larry Clark, Executive Counselor, Info-Tech Research Group and Former CIO

The CFO carries big responsibilities focused on mitigating organizational risks. It’s not their job to be generous or flexible when so
much is at stake. While the CEO appears higher on the organizational chart than the CFO, in many ways the CFO’s accountabilities
and responsibilities are on par with, and in some cases greater than, those of the CEO.

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The CFO: What they want from the IT budget
What they need should look familiar, so do your homework and be an open book.

Your CFO’s IT budget to-do list: Remember to:

• A review of the previous year financial performance. This demonstrates to the CFO your awareness, • Avoid being flashy. Exclude proposed
savvy, and overall competence in the financial management realm. This is also your opportunity to expenditures with a lot of bells and whistles
start laying out the real-life context within which IT has been operating. Information to show that don’t directly tie to concrete business
includes: objectives.
o Budget vs. actuals, including an overview of factors that led to major variances. • Be a conservationist. Show how you plan to
re-use or extend assets that you already
o Percentage difference in proposed budget versus previous year’s budget, and major have.
contributing factors to those differences (i.e. unanticipated projects, changes, or events).
• Act like a business leader. Demonstrate
• Presentation of information according to Finance’s existing categories. This makes it as easy as your understanding of near-term (12-month)
possible for them to plug your numbers into their system. realities, priorities, and goals.
• Separate views of overall workforce vs. overall vendor spending. This is a traditional view. • Think like them. Present reliable and
• Separate views of capital expenditure (CapEx) and operating expenditure (OpEx). This also defensible calculations of benefits versus
includes information on expected lifespan of proposed new capital assets to inform risks as well as projected ROI for major
depreciation/amortization decisions. areas of new or different spending.

• Explanation of anticipated sources of funding. Specifically, indicate whether the funding required is
a brand-new net increase or a reallocation from the existing pool.
• Details (upon request). Have these available for every aspect of your proposed budget.

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The CFO: Budget challenges and opportunities
Budget season is a great time to start changing the conversation and building trust.

Low trust Competition Mismatched buckets

Poor financial literacy and historical You’re not the only department the CFO is IT’s spend classes and categories probably
challenges
Potential

sloppiness among business unit leaders dealing with. Everyone is competing for won’t match what’s in Finance’s budget
means that a CFO may come into budget their piece of the pie, and some business template or general ledger. Annual
conversations with skepticism. This can put unit leaders are persistent. A good CFO will budgeting isn’t the best time to bring this
them on the offensive and put you on the stay out of the politics and not be swayed by up. Respect Finance’s categories, but plan to
defensive. You have to prove yourself. sweet talk, but it can be an exhausting tackle permanent changes at a less busy
experience for them. time.

Build confidence Educate Initiate alignment

opportunities

Engaging in the budgeting process is your The CFO will not know as much as you An important governance objective is to
Potential

best chance to demonstrate your knowledge about the role technology could and should change the way IT expenditure is
about the business and your financial play in the organization. Introduce new categorized and tracked to better reveal and
acumen. The more that the CFO sees that language around technology focused on understand what’s really happening. This
you get it and are taking it seriously, the capabilities and benefits. This will start to process should be done gradually over time,
more confidence and trust they’ll have in shift the conversation away from costs and but definitely communicate what you want
you. toward value. to do and why.

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The CXO: Understand their role
CXOs are a diverse group who lead a range of business functions including admin, operations, HR, legal,
production, sales and service, and marketing, to name a few.
What are the CXO’s role and responsibilities? What’s important to the CXO?
Like you, the CXO’s job is to help the organization realize its goals and
Staffing Planning Visibility
objectives. How each CXO does this is specific to the domain they lead.
Variations in roles and responsibilities typically revolve around: Skills Inclusion
Performance
• Law and regulation. Some functions have compliance as a core mandate,
including legal, HR, finance, and corporate risk groups. Reporting Predictability Collaboration
• Finance and efficiency. Other functions prioritize time, money, and process Funding Reliability
such as finance, sales, customer service, marketing, production, operations,
Customers
and logistics units. Information Knowledge
• Quality. These functions prioritize consistency, reliability, relationship, and Acknowledgement
brand such as production, customer service, and marketing.

Disagreement is common between business-function leaders – they have different primary areas of focus, and conflict and
misalignment are natural by-products of that fact. It’s also hard to make someone care as much about your priorities as you do.
Focus your efforts on sharing and partnering, not converting.

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The CXO: What they want from the IT budget
Focus on their unique part of the organization and show that you see them.

Your CXO’s IT budget to-do list: Remember to:

• A review of the previous year’s IT expenditure on the business function. This includes: • Celebrate any collaborative wins from last
o Budget vs. actuals (if available) for the business function, and overview of any situations or year. You want to reinforce that working
factors that led to major variances. together is in both of your best interests and
you’d like to keep it going.
o Percentage difference in proposed budget for that business function vs. the previous year’s
spend, and major contributing factors to those differences, i.e. unanticipated projects, changes, • Get to the apps fast. Apps are visible,
or events. concrete, and relatable – this is what the
o Last year’s IT expenditure per business function employee vs. proposed IT expenditure per CXO cares about. Core IT infrastructure, on
business function employee (if available). This is a good metric to use going forward as it’s a the other hand, is technobabble about
fair comparative internal benchmark. something that’s invisible, boring, and
disengaging for most CXOs.
• Separate views of proposed IT workforce vs. proposed IT vendor spending for the business
function. Do a specific breakout of proposed expenditure for the major applications that business • Focus on the business function’s actual
unit explicitly uses. technology needs and consumption. Show
them where they stand in relation to others.
• Separate views of proposed IT capital expenditure (CapEx) and proposed IT operating expenditure This will get their attention and serve as an
(OpEx) for the business function. Show breakdowns for each capital project, opportunity to provide some education.
as well as summaries for their core applications and portion of shared IT services.

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The CXO: Budget challenges and opportunities
Seek out your common ground and be the solution for their real problems.

Different priorities Perceived irrelevance Bad track record

Other business unit leaders will have bigger Some business unit leaders may be If a business unit has had friction with IT in
challenges
Potential

concerns than your IT budget. They have completely unaware of how they use IT, the past or has historically been
their own budget to figure out plus other in- how much they use, and how they could use underserved, they may be hesitant to let you
flight issues. The head of sales, for instance, it more or differently to improve their in, may be married to their own solutions, or
is going to be more concerned with hitting performance. They may have a learning perhaps do not know how to express what
sales goals for this fiscal year than planning curve to tackle before they can start to see they need.
for next. your relationship as collaborative.

Start collaborating Practice perspective taking Build relationships

opportunities

You and other business unit leaders have a Be genuinely curious about the business You only need to solve one problem for a
Potential

lot in common. You all share the objective unit, how it works, and how they overcome business unit to change how they think of
of helping the organization succeed. Focus obstacles. See the organization from their you. Just one. Find that one thing that will
in on your shared concerns and how you can point of view. For now, keep your make a real difference – ideally small but
make progress on them together before technologies completely out of the impactful – and work it into your budget.
digging into your unique challenges. discussion – that will come later on.

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The CEO: Understand their role
A CEO sets the tone for an organization, from its overall direction and priorities to its values and culture.
What’s possible and what’s not is usually determined by them.
What are the CEO’s role and responsibilities? What’s important to the CEO?
• Assemble an effective team of executives and advisors.
Strategy Priorities Results
• Establish, communicate, and exemplify the organizations core values.
• Study the ecosystem within which the organization exists.
Leadership Performance Insight
• Identify and evaluate opportunities. Vision Metrics Growth
• Set long-term directions, priorities, goals, and strategies.
Values Accountability Cohesion
• Ensure ongoing organizational performance, profitability, and growth.
• Connect the inside organization to the outside world. Goals Context
• Make the big decisions no one else can make. Stakeholders

Unlike the CFO and CXOs, the CEO is responsible for seeing the big picture. That means they’re operating in the
realm of big problems and big ideas – they need to stay out of the weeds. IT is just one piece of that big picture, and
your problems and ideas are sometimes small in comparison. Use any time you get with them wisely.

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The CEO: What they want from the IT budget
The CEO wants what the CFO wants, but at a higher level and with longer-term vision.

Your CEO’s IT budget to-do list: Remember to:

• A review of the previous year’s financial performance. In addition to last year’s budget vs. actuals • Be brief. Hopefully, the CEO is already well
vs. proposed budget and any rationales for variances, the CEO’s interest is in seeing numbers in versed on the strategic spend plans. Stay
terms of strategic delivery. Focus on performance against last year’s goals and concrete benefits high-level, reserve the deep dive for your
realized. documentation, and let the CEO decide if
they want to hash anything out in more
• A review of initiatives undertaken to optimize/reduce operating costs. Note overall gains with a detail.
specific look at initiatives that had a substantial positive financial impact.
• Be strategic. If you can’t tie it to a strategic
• A specific summary of the cost landscape for new strategic or capital projects. Ideally, these objective, don’t showcase it.
projects have already been committed to at the executive level. A more fine-tuned analysis of
anticipated costs and variables may be required, including high-level projects with long-term • Use performance language. This means
impact on operational expenditure. Categorize these expenditures as investments in innovation, citing goals, metrics, and progress made
growth, or keeping the lights on. against them.
• Details (upon request). Have these available for every aspect of your proposed budget. • Ensure the CFO can translate. You may not
get a direct audience with the CEO – the
CFO may be your proxy for that. Ensure
that everything is crystal clear so that the
CFO can summarize your budget on your
behalf.

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The CEO: Budget challenges and opportunities
Strategically address the big issues, but don’t count on their direct assistance.

Lack of interest Deep hierarchy Uncertainty

Your CEO may just not be enthusiastic The executive-level CIO role isn’t yet What’s happening on the outside will affect
challenges
Potential

about technology. For them, IT is strictly a pervasive in every industry. There may be what needs to be done on the inside. The
cost center operating on the margins. If they one or more non-IT senior management CEO has to assess and respond quickly,
don’t have a strategic vision that includes layers between IT and the office of the CEO, changing priorities and plans in an instant.
technology, IT’s budget will always be as well as other bureaucratic hurdles, which An indecisive CEO that’s built an inflexible
about efficiency and cost control and not prohibit your direct access. organization will make it difficult to pivot
investment. as needed.

Grow competency Build partnerships Bake in resilience

opportunities

Sometimes, IT just needs to wait it out. The Other business-function executives may Regardless of who’s at the helm, systematic
Potential

biggest shifts in technology interest often need to be IT’s voice. Investment proposals investment in agile and flexible solutions
come with an outright change in the may be more compelling coming from them that can be readily scaled, decoupled,
organization’s leadership. In the meantime, anyway. Behind-the-scenes partnerships and redeployed, or decommissioned is a good
fine-tune your operational excellence, brush high-profile champions are something you strategy. Use recent crises to help make the
up on business skills, and draft out your best want regardless of your degree of CEO strategic case for a more resilient posture.
ideas on paper. access.

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What about the CIO view on the IT budget?
IT leaders tend to approach budgeting from an IT services perspective. After all, that’s how their departments
are typically organized.
The CFO expense view, CXO business view, and CEO innovation view represent IT’s stakeholders. The CIO service view, however, represents you, the IT
budget creator. This means that the CIO service view plays a slightly different role in developing your IT budget communications.

An IT team effort A logical starting point A supporting view

Most budget drafts start with internal IT These common organizational units and their You probably don’t want to lead your budget
management discussion. These managers are managers tend to represent discrete IT presentation with IT’s perspective – it won’t
differentially responsible for apps dev and service verticals. This means the CIO service make sense to your stakeholders. Instead,
maintenance, service desk and user support, view is a natural structural starting point for select certain impactful pieces of your view
networks and data center, security, data and your budget-building process. Stakeholder to drop in where they provide valued
analytics, and so forth. views of your budget will be derived from information and augment the IT budget
this first view. story.

Things to bring forward… Things to hold back…

• All major application costs • End-user support and • Minor applications costs • Other infrastructure costs
• Security/compliance costs enablement costs • Day-to-day network and • IT management and
• Strategic project costs • Data and BI initiative costs data center costs administration costs

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1.2 Assess your stakeholders

1 hour
1. Use the “Stakeholder alignment assessment” template slide following this Input Output
one to document the outcomes of this activity.

2. As an IT management team, identify your key budget stakeholders and

specifically those in an approval position. • Organizational awareness of • Assessment of key
key stakeholders and budget stakeholder needs and a list of
3. Use the information provided in this blueprint about various stakeholder approvers potential changes or additions
responsibilities, areas of focus, and what’s typically important to them to to the IT budget/budget
• Previous years’ budgets
process
determine each key stakeholder’s needs regarding the information
contained in your IT budget. Note their stated needs, any idiosyncrasies,
and IT’s current relationship status with the stakeholder (positive, neutral,
or negative). Materials Participants
4. Assess previous years’ IT budgets to determine how well they targeted
each different stakeholder’s needs. Note any gaps or areas for future • Whiteboard/flip charts • Head of IT
improvement.
• Stakeholder alignment • IT Financial Lead
5. Develop a high-level list of items or elements to stop, start, or continue assessment template
• Other IT Management
(following slide)
during your next budgeting cycle.

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Stakeholder alignment assessment
Document the outcomes of your assessment below. Examples are provided below.
Stakeholder Relationship status Understanding of needs Budget changes/additions
Do more detailed breakouts of CapEx vs. OpEx as 30%
Wants at least 30% of budget to be CapEx. Needs more
CFO Positive CapEx not realistic – pre-meet. Talk to Enterprise PMO
detail concerning benefits and tracking of realization.
about improving project benefits statement template.
Break out sales consumption of IT resources in detail
Only concerned with hitting sales targets. Needs to
VP of Sales Negative focusing on CRM and SFA tool costs. Propose business
respond/act quickly based on reliable data.
intelligence enhancement project.
Multiple manual processes – would benefit from Break out marketing consumption of IT resources and
Director of Marketing Neutral increased automation of campaign management and publicly share/compare to generate awareness/support for
social media posting. tech investment. Work together to build ROI statements
[Name/Title] [Positive/Neutral/Negative] [Insert text] [Insert text]
[Name/Title] [Positive/Neutral/Negative] [Insert text] [Insert text]
[Name/Title] [Positive/Neutral/Negative] [Insert text] [Insert text]
[Name/Title] [Positive/Neutral/Negative] [Insert text] [Insert text]
[Name/Title] [Positive/Neutral/Negative] [Insert text] [Insert text]
[Name/Title] [Positive/Neutral/Negative] [Insert text] [Insert text]
[Name/Title] [Positive/Neutral/Negative] [Insert text] [Insert text]
[Name/Title] [Positive/Neutral/Negative] [Insert text] [Insert text]

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Set your IT budget pre-selling strategy
Pre-selling is all about ongoing communication with your stakeholders. This is the most game-changing thing
you can do to advance a proposed IT budget’s success.
When IT works well, nobody notices. When it doesn’t, the persistent criticism about IT not delivering value will pop up, translating directly into less
funding. Cut this off at the pass with an ongoing communications strategy based on facts, transparency, and perspective taking.

1 Know your channels

Identify all the communication channels you can leverage
4 Don’t be annoying
Talking about IT all the time will turn people off. Plan chats
including meetings, committees, reporting cycles, and that don’t mention IT at all. Ask questions about their world
bulletins. Set up new channels if they don’t exist. and really listen. Empathy’s a powerful tool.

2 Identify partners
5 Communicate IT initiatives at launch
Don’t let initiatives fall off everyone’s radar once approved.
Nothing’s better than having a team of supporters when pitch
day comes. Quietly get them on board early and be direct about Keep stakeholders up to speed on major milestones achieved,
the role each of you will play. and remind them of the benefits they’re paying for on go-live
day and as they’re realized thereafter.

3 Always be prepared
6 Communicate IT successes
Have information and materials about proposed initiatives at- Carry the same narrative forward through to the end and tell
the-ready. You never know when you’ll get your chance. But if the whole story. Include comments from stakeholders and
your facts are still fuzzy, do more homework first. beneficiaries about the value they’re receiving.
.
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Pre-selling with partners
The thing with pre-selling to partners is not to take a selling approach. Take a collaborative approach instead.

A partner is an influencer, advocate, or beneficiary of the expenditure or A collaborative approach tends to result in a higher level of
investment you’re proposing. Partners can: commitment
• Advise you on real business impacts. than a selling approach.
• Voice their support for your funding request. Put yourself in their shoes, using their language. Asking
“How will this affect you?” focuses on what’s in it for them.
• Present the initial business case for funding approval themselves.
• Agree to fund all or part of an initiative from their own budget.
When partners agree to pitch or fund an initiative, IT can lose control of it. CIO: CMO:
Make sure you set specific expectations about what IT will help with or do on an “We’re thinking of investing in “Yes, we currently pay two
technology that marketing can use employees to post on Facebook
ongoing basis, such as:
to automate posting content to and Twitter, so if it could make that
• Calculating the upfront and ongoing technology maintenance/support costs of social media. Is that something you more efficient, then there would be
the initiative. could use?” cost savings there.”

• Leading the technology vetting and selection process, including negotiating with
vendors, setting service-level agreements, and finalizing contracts.
• Implementing selected technologies and training users.
• Maintaining and managing the technology, including usage metering.
• Making sure the bills get paid.
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Pre-selling with approvers
The key here is to avoid surprises and ensure the big questions are answered well in advance of decision day.

An approver is the CFO, CEO, board, council, or committee that formally Blindsiding approvers with a major request at a budget
commits funding support to a program or initiative. Approvers can: presentation could trigger an emotional response, not the
• Point out factors that could derail realization of intended benefits. rational and objective one you want.
• Know that a formal request is coming and factor it into their planning. Make approvers part of the solution by soliciting their
advice and setting their expectations well in advance.
• Connect your idea with others to create synergies and efficiencies.
• Become active advocates.
When approvers cool to an idea, it’s hard to warm them up again. Gradually
socializing an idea well in advance of the formal pitch gives you the chance to isolate CIO: “The underwriting team and CFO: “How do the agents feel
and address those cooling factors while they’re still minor. Things you can address if I think there’s a way to cut new about it? They submit to
you get an early start with future approvers include: policyholder approval turnaround underwriting differently and might
from 8 to 10 days down to 3 or 4 not want to change. They’d all
• Identify and prepare for administrative, regulatory, or bureaucratic hurdles. using an online intake form. Do need to agree on it. Exactly how
you see any obstacles?” does this impact sales?”
• Incorporate approvers’ insights about organizational realities and context.
• Further reduce the technical jargon in your language.
• Fine tune the relevance and specificity of your business benefits statements.
• Get a better sense of the most compelling elements to focus on.

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1.3 Set your budget pre-selling strategy

1 hour
1. Use the “Stakeholder pre-selling strategy” template slide following this Input Output
instruction slide to document the outcomes of this activity.

2. Carry forward your previously-generated stakeholder alignment

assessment from Step 1.2. As a management team, discuss the following • Stakeholder Alignment • Stakeholder Pre-selling
Assessment (in-deck Strategy
for each stakeholder:
template)
a) Forums and methods of contact and interaction.
b) Frequency of interaction.
c) Content or topics typically addressed during interactions. Materials Participants
3. Discuss what the outcomes of an ideal interaction would look like with
each stakeholder. • Stakeholder Pre-selling • Head of IT
Strategy (in-deck template)
4. List opportunities to change or improve the nature of interactions and • IT Financial Lead
specific actions you plan to take. • Whiteboard/flip charts
• Other IT Management

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Stakeholder pre-selling strategy
Document the outcomes of your discussion. Examples are provided below.
Current interactions
Stakeholder Opportunities and actions
Forum Frequency Content
IT expenditure updates Increase one-on-one meeting to weekly. Alternate focus – retrospective
CFO One-on-one meeting Monthly and tracking toward update one week, future-looking case development the next. Invite one
budgeted amount. business unit head to future-looking sessions to discuss their IT needs.
Set up bi-weekly one-on-one meeting – initially focus on what sales
General business update -
VP of Sales Executive meeting Quarterly does/needs, not tech. Later, when the relationship has stabilized, bring
dominates.
data that shows Sales’ consumption of IT resources.
General business update - Set up monthly one-on-one meeting. Temporarily embed BA to better
Director of Marketing Executive meeting Quarterly
quiet. discover/understand staff processes and needs.
[Name/Title] [Insert text] [Insert text] [Insert text] [Insert text]
[Name/Title] [Insert text] [Insert text] [Insert text] [Insert text]
[Name/Title] [Insert text] [Insert text] [Insert text] [Insert text]
[Name/Title] [Insert text] [Insert text] [Insert text] [Insert text]
[Name/Title] [Insert text] [Insert text] [Insert text] [Insert text]
[Name/Title] [Insert text] [Insert text] [Insert text] [Insert text]
[Name/Title] [Insert text] [Insert text] [Insert text] [Insert text]

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Phase recap: Lay your foundation

Build in the elements from the start that you need to “Many departments have mostly
facilitate budgetary approval. labor for their costs. They’re not
You should now have a deeper understanding of the what, why, and who of your IT budget. buying a million and a half or two
These elements are foundational to streamlining the budget process, getting aligned with
peers and the executive, and increasing your chances of winning budgetary approval in the million dollars’ worth of software
end.
In this phase, you have:
every year or fixing things that
• Reviewed what your budget is and does. Your budget is an important governance and break. They don’t share IT’s
communication tool that reflects organizational priorities and objectives and IT’s
understanding of them. operations mindset and I think they
• Taken a closer look at your stakeholders. The CFO, CEO, and CXOs in your organization get frustrated.”
have accountabilities of their own to meet and need IT and its budget to help them
succeed. – Matt Johnson, IT Director Governance and Business
Solutions, Milwaukee County
• Developed a strategy for continuously pre-selling your budget. Identifying opportunities
and approaches for building relationships, collaborating, and talking meaningfully about
IT and IT expenditure throughout the year is one of the leading things you can do to get
on the same page and pave the way for budget approval.

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Phase 2
Get Into Budget-Starting Position

Lay Your Get Into Budget-Starting Develop Your Build Your Create and Deliver Your
Foundation Position Forecasts Proposed Budget Presentation
1.1 Understand what your budget 2.1 Assemble your resources 3.1 Develop assumptions and 4.1 Aggregate your numbers 5.1 Plan your content
is alternative scenarios
2.2 Understand the four views of 4.2 Stress test your forecasts 5.2 Build your presentation
and does
the ITFM Cost Model 3.2 Forecast your project CapEx
4.3 Challenge and perfect your 5.3 Present to stakeholders
1.2 Know your stakeholders
2.3 Review last year’s budget vs. 3.3 Forecast your non-project rationales
5.4 Make final adjustments and
1.3 Pre-sell your budget all year actuals and five-year historical CapEx and OpEx
submit your IT budget
trends
2.4 Set your high-level goals

This phase will walk you through the following • Setting goals and metrics for the next budgetary cycle. Create a Transparent and
activities:
This phase involves the following participants: Defensible IT Budget
• Putting together your budget team and gather your
• Head of IT
data.

• Selecting which views of the ITFM Cost Model you’ll • IT Financial Lead
Info-Tech Research Group | 49
use. • Other IT Management
Get into budget-starting position

Now’s the time to pull together your budgeting resources and

decision-making reference points. “A lot of the preparation is
This phase is about clarifying your context and defining your boundaries. education for our IT managers so
• Assemble your resources. This includes the people, data, and other information you’ll
need to maximize insight into future spend requirements. that they understand what’s in
• Understand the four views of the IT Cost Model. Firm up your understanding of the CFO their budgets and all the moving
expense view, CIO service view, CXO business view, and CEO innovation view and
decide which ones you’ll use in your analysis and forecasting. parts. They can actually help you
• Review last year’s budget versus actuals. You need last year’s context to inform next keep it within bounds.”
year’s numbers as well as demonstrate any cost efficiencies you successfully executed.
– Trisha Goya, Director, IT Governance &
• Review five-year historical trends. This long-term context gives stakeholders and Administration, Hawaii Medical Service Association
approvers important information about where IT fits into the business big picture and
reminds them how you got to where you are today.
• Set your high-level goals. You need to decide if you’re increasing, decreasing, or holding
steady on your budget and whether you can realistically meet any mandates you’ve been
handed on this front. Set a target as a reference point to guide your decisions and flag
areas where you might need to have some tough conversations.

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Gather your budget-building team
In addition to your CFO, CXOs, and CEO, there are other people who will provide important information,
insight, and skill in identifying IT budget priorities and costs.
Role Skill set Responsibilities
IT Finance Lead • Financial acumen, specifically with cost IT finance personnel will guide the building of cost forecasting
forecasting and budgeting. methodologies for operating and capital costs, help manage IT cash
• Understanding of actual IT costs and service- flows, help identify cost reduction options, and work directly with the
based costing methods. finance department to ensure they get what they need.

IT Domain Managers • Knowledge of services and their outputs. They will be active participants in budgeting for their specific domains,
• Understanding of cost drivers for the services act as a second set of eyes, assist with and manage their domain
they manage. budgets, and engage with stakeholders.

Project Managers • Knowledge of project requirements. Project managers will assist in capital and operational forecasting and
• Project budgeting. will review project budgets to ensure accuracy. They will also assist in
• Understanding of project IT-specific costs. forecasting the operational impacts of capital projects.

As the head of IT, your role is as the budgeting team lead. You understand both the business and IT strategies, and
have relationships with key business partners. Your primary responsibilities are to guide and approve all budget
components and act as a liaison between finance, business units, and IT.

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Set expectations with your budgeting team
Be clear on your goals and ensure everyone has what they need to succeed.

Your responsibilities and accountabilities. Goals and requirements. Budgeting fundamentals.

• Budget team lead. • Idea generation for investment and cost • Review of key finance concepts – CapEx,
• Strategic direction. optimization. OpEx, cashflow, income, depreciation, etc.
• Primary liaison with business stakeholders. • Cost prioritization and rationale. • What a budget is, and its component parts.
• Pre-presentation approver and final decision • Skills requirements and sourcing options. • How the budget will be used by IT and the
maker. organization.
• Risk assessment and operational impact.
• How to calculate cost forecasts.
• Data format and level of granularity.

Their responsibilities and accountabilities. Available resources.

Timeframes and deadlines.
• Data/information collection. • Internal and external sources of data and
• Budgeting stages/phases and their information.
• Operational knowledge of their services, deliverables.
projects, and staff. • Tools and templates for tracking information
• Internal IT deadlines. and performing calculations.
• Cost forecast development for their respective
domains/projects. • External business deadlines. • Individuals who can provide finance concept
• Review and sanity checking of their peers’ • Goals and cadence of future working sessions guidance and support.
cost forecasts. and meetings. • Repositories for in-progress and final work.

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2.1 Brief and mobilize your IT budgeting team
2 hours
1. Download the IT Cost Forecasting and Budgeting Workbook

2. Organize a meeting with your IT department management team, team Input Output
leaders, and project managers.

3. Review their general financial management accountabilities and

• The organization’s budgeting • Assignment of IT budgeting
responsibilities. process and procedures team responsibilities
4. Discuss the purpose and context of the budgeting exercise, different • A budgeting schedule
budget components, and the organization’s milestones/deadlines.

5. Identify specific tasks and activities that each member of the team must
complete in support of the budgeting exercise. Materials Participants
6. Set up additional checkpoints, working sessions, or meetings that will take
you through to final budget submission. • IT Cost Forecasting and • Head of IT
Budgeting Workbook
7. Document your budget team members, responsibilities, deliverables, and • IT Financial Lead
due dates on the “Planning Variables” tab in the IT Cost Forecasting & • Whiteboard/flip charts
• Other IT Management
Budgeting Workbook.

Download the IT Cost Forecasting and

Budgeting Workbook
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Leverage the ITFM Cost Model
Each of the four views breaks down IT costs into a different array of categories so you and your stakeholders
can see expenditure in a way that’s meaningful for them.

You may decide not to use all four views based on your goals, audience, and available time. However, let’s start with how you can use the
first two views, the CFO expense view and the CIO service view.

These two views provide information

that will help you optimize IT costs.
They’re designed to allow the CFO and
CIO to find a common language that
will allow them to collaboratively make
decisions about managing IT
expenditure effectively.

Forecasting this
view is mandatory
The CFO expense view is fairly traditional – The CIO service view is your view, i.e. it’s how IT
workforce and vendor. However, Info-Tech’s approach tends to organize and manage itself and is often the
breaks down the vendor software and hardware buckets logical starting point for expenditure planning and
into on-premises and cloud. Making this distinction is Forecasting this view analysis. Sub-categories in this view, such as security
increasingly critical given key differences in CapEx vs. is recommended and data & BI, can also resonate strongly with business
OpEx treatment. stakeholders and their priorities.
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Extend your dialogue to the business
Applying the business optimization views of the ITFM Cost Model can bring a level of sophistication to your
IT cost analysis and forecasting efforts.

Some views take a bit more work to map out, but they can be powerful tools for communicating the value of IT to the business. Let’s look at
the last two views, the CXO business view and the CEO innovation view.

The CXO business view looks at IT expenditure The CEO innovation view is one of the hardest to
business unit by business unit so that each can Forecasting this analyze and forecast since a single spend item may
understand their true consumption of IT resources. This view is apply to innovation, growth, and keeping the lights on.
view relies on having a fair and reliable cost allocation recommended However, if you have an audience with the CEO and
formula, such as one based on relative headcount, so it they want IT to play a more strategic or innovative role,
runs the risk of inaccuracy. then this view is worth mapping.
Forecasting this view
is optional

These two views provide information

that will help you optimize IT support to
the business. These views also have a
collaborative goal in mind, enabling IT
to talk about IT spend in terms that will
promote transparency and engage
business stakeholders.
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2.2 Select the ITFM Cost Model views you plan to complete
based on your goals
30 minutes
The IT Cost Forecasting and Budgeting Workbook contains standalone
sections for each view, as well as rows for each lowest-tier sub-category in a Input Output
view, so each view can be analyzed and forecasted independently.
1. Review Info-Tech’s ITFM Cost Model and the expenditure categories and
sub-categories each view contains. • Stakeholder analysis • Decision on which views in
the ITFM Cost Model you’ll
2. Revisit your stakeholder analysis for the budgeting exercise. Plan to: • Info-Tech’s ITFM Cost
use for historical expenditure
Model
a) Complete the CFO expense view regardless. analysis and forecasting
purposes
b) Complete the CIO service view – consider doing this one first for
forecasting purposes as it may be most familiar to you and serve as an
easier entry point into the forecasting process.
c) Complete the CXO business view – consider doing this only for select Materials Participants
business units if you have the objective of enhancing awareness of
their true consumption of IT resources or if you have (or plan to have)
a show-back/charge-back mechanism.
• Info-Tech’s ITFM Cost • Head of IT
d) Complete the CEO innovation view only if your data allows it and Model
there’s a compelling reason to discuss the strategic or innovative role • IT Financial Lead
of IT in the organization. • Other IT Management

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Gather your budget-building data
Your data not only forms the content of your budget but also serves as the supporting evidence for the decisions
you’ve made.
Ensure you have the following data and information available to you and your budgeting team before diving in:

Past data Current data Future data

• Last fiscal year’s budget. • Current-year IT positions • Estimated market value for
• Actuals for the past five and salaries. any IT positions to be filled
• Active vendor contracts next year (both backfill of
fiscal years.
with payment schedules current vacancies and
• Pre-set capital depreciation/ proposed net-new positions).
amortization amounts to be applied to next and amounts (including active
multi-year agreements). • Pricing data on proposed vendor purchases or
fiscal year’s budget.
• Cost projections for remainder of any projects contracts.
that are committed or in-progress, including • Cost estimates for any capital/strategic
If you’re just getting started building a projected OpEx for ongoing maintenance and projects that are being proposed but not yet
repeatable budgeting process, treat it like any support. committed, including resulting
other project, complete with a formal plan/ maintenance/support OpEx.
charter and a central repository for all related • Any known pending credits to be received or
data, information, and in-progress and final documents. applied in the next fiscal year.
Once you’ve identified a repeatable approach that works for you, transition the budgeting
project to a regular operational process complete with policies, procedures, and tools.

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Review last year’s budget vs. actuals
This is the starting point for building your high-level rationale around
what you’re proposing for next fiscal year.
But first, some quick definitions:
• Budgeted: What you planned to spend when you started the fiscal year.
• Actual: What you ended up spending in real life by the end of the fiscal year.
• Variance: The difference between budgeted expenditure and actual expenditure.

For last fiscal year, pinpoint the following metrics and information:
Budgeted and actual IT expenditure overall and by major cost category. Actual IT expenditure as a percentage of organizational revenue.
Categories will include workforce (employees/contractors) and vendors This is a widely-used benchmark that your CFO will expect to see.
(hardware, software, contracted services) at a minimum.
Actual IT CapEx and OpEx.
The known and likely drivers behind budgeted vs. actual variances.
CapEx is often more variable than OpEx over time. Separate them so you
Your rationales will affect your perceived credibility. Be straightforward, can see the real trends for each. Consider:
avoid defending or making excuses, and just show the facts.
• Sub-dividing CapEx by strategic projects and non-strategic “business as
Ask your CFO what they consider acceptable variance thresholds for usual” spend (e.g. laptops, network maintenance gear).
different cost categories to guide your variance analysis, such as 1% for • Showing overall CapEx and OpEx as percentages of their organization-
overall IT expenditure. wide counterparts if that information is available.
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Next, review your five-year historical expenditure trends

The longer-term pattern of IT expenditure can help you craft a narrative

about the overarching story of IT.
For the previous five fiscal years, focus on the following:

Actual IT expenditure as a percentage of organizational revenue.

Again, for historical years 2-5, you can break this down into granular cost
categories like workforce, software, and infrastructure like you did for last
fiscal year. Avoid getting bogged down and focusing on the past – you
ultimately want to redirect stakeholders to the future.
So, what’s the trend? Consider these questions:
• Is the year-over-year trend on a steady trajectory or are there
Percentage expenditure increase/decrease year to year. notable dips and spikes?
You may choose to show overall IT expenditure amounts, breakdowns by • Are there any one-time capital projects that significantly inflated
CapEx and OpEx, as well as high-level cost categories. CapEx and overall spend in a given year or that forced
As you go back in time, some data may not be available to you, may be maintenance-and support-oriented OpEx commitments in
unreliable or incomplete, or employ the same cost categories you’re using subsequent years?
today. Use your judgement on the level of granularity you want to and can • Does there seem to be an overall change in the CapEx-to-OpEx
apply when going back two to five years in the past. ratio due to factors like increased use of cloud services,
outsourcing, or contract-based staff?

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Take a close look at financial data showcasing the cost-control
measures you’ve taken
Your CFO will look for evidence that you’re gaining efficiencies by controlling costs, which is often a
prerequisite for them approving any new funding requests.
Your objective here is threefold: Do the following:
1. Demonstrate IT’s track record of fiscal responsibility and • List any specific cost-control initiatives and their initial objectives and targets.
responsiveness to business priorities. • Identify any changes made to those targets and your approaches due to changing
2. Acknowledge and celebrate your IT-as-cost-center efficiency conditions, with rationales for the decisions made. For example:
gains to clear the way for more strategic discussions. o Mid-year, the business decided to allow approximately half the workforce
3. Identify areas where you can potentially source and reallocate to work from home on a permanent basis.
recouped funds to bolster other initiatives or business cases for o As a result, remote-worker demand on the service desk remained high and
net-new spend. actually increased in some areas. You were unable to reduce service desk
This step is about establishing credibility, demonstrating IT value, staff headcount as originally planned.
building trust, and showing the CFO you’re on their team. o You’re now exploring ways to streamline ticket intake and assignment to
increase throughput and speed resolution.
“Eliminate the things you don’t need. People will • Report on completed cost-control initiatives first, including targets, actuals, and
give you what you need when you need it if you’re related impacts. Include select feedback from business stakeholders and users
about the impact of your cost-control measure on them.
being responsible with what you already have.”
• For in-progress initiatives, report progress made to-date, benefits realized to
– Angela Hintz, VP of PMO & Integrated Services,
Blue Cross and Blue Shield of Louisiana
date, and plans for continuation next fiscal year.

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2.3 Review your historical IT expenditure
8 hours
1. Download the IT Cost Forecasting and Budgeting Workbook. L-O. Year-over-year comparative metrics will be calculated for you.

2. On Tab 1, “Historical Events & Projects,” note the cost-driving and cost- d) Enter FTEs by business function in columns R-AA, rows 34-43.
saving events that occurred last fiscal year that drove any variance Expenditure per FTE and year-over year comparative metrics will
between budgeted and actual expenditure. Describe the nature of their be
impact and current status (ongoing, resolved – temporary impact, or calculated for you.
resolved – permanent impact). 5. Using Tabs 2, “Historical Expenditure” and 3, “Historical Analysis”,
3. Also on Tab 1, “Historical Events & Projects”, summarize the work done review and analyze the resulting data sets and graphs to identify overall
on capital or strategic projects, expenditures, and status (in progress, patterns, specifically notable increases or decreases in a particular
deferred, canceled, or complete). category of expenditure or where rationales are repeated across categories
or views (these are significant).
4. On Tab 2, “Historical Expenditure”:
6. Finally, flag any data points that help demonstrate achievement of, or
a) Enter the budgeted and actuals data for last fiscal year in columns
progress toward, any cost-control measures you implemented.
D-H for the views of the ITFM Cost Model you’re opted to do, i.e.
CFO expense view, CIO service view, CXO business view, and CEO
innovation view. Download the IT Cost Forecasting and
b) Enter a brief rationale for any notable budgeted-versus-actuals Budgeting Workbook
variances or other interesting items in column K.
c) Enter actuals data for the remaining past five fiscal years in columns
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2.3 Review your historical IT expenditure

Input Output Materials Participants

• Budgeted data for the • Mapped budgeted for last • IT Cost Forecasting and • Head of IT
previous fiscal year and fiscal year, mapped actuals Budgeting Workbook
• IT Financial Lead
actuals data for the previous for the past five fiscal
• Whiteboard/flip charts
five fiscal years years, and variance metrics • Other IT Management
and rationales

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Pull historical trends into a present-day context when setting
your high-level goals
What’s happening to your organization and the ecosystem within which it’s operating right now? Review
current business concerns, priorities, and strategies.
Knowing what happened in the past can provide good insights and give you a chance to show stakeholders your money-management track record. However,
what stakeholders really care about is “now” and “next”. For them, it’s all about current business context.
Ask these questions about your current context to assess the relevance of your historical trend data:

What’s the state of What are the What has the business What’s the business
the economy and how is organization’s stated explicitly communicated executive’s attitude on
it affecting your organization? strategic goals and objectives? about finance-related targets? budget increase requests?
Some industries are very sensitive These can change year to year as Do your best to honor mandates. If the CFO and others rail against
to economic cycles, causing wild well, and often manifest on the However, if cuts are suggested that even the most necessary inflation-
budget fluctuations year to year. CapEx side in the form of strategic could jeopardize core service driven increases, you’ll need to take
This uncertainty can reduce the projects selected. Since this is so delivery, tread cautiously, and pick a conservative approach, focus on
volume of spend you automatically variable, using previous years’ your battles. You may be able to halt cost-saving initiatives, and plan to
carry over one year to the next, CapEx to determine next fiscal’s new capital spend to generate cuts, redirect last year’s expenditures
making past spend patterns less CapEx isn’t always useful except in but these projects may get approved instead of pursuing net-new spend.
relevant to your current budgeting regard to multi-year, ongoing capital anyway, with IT expected to make
effort. projects. cuts to OpEx.

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Set metrics and targets for some broader budget effectiveness
improvement efforts
Budget goalsetting isn’t limited to CapEx and OpEx targets. There are several effectiveness metrics to track
overall improvement in your budgeting process.
Step back and think about other budget and expenditure goals you Current Future
have. Budgeting metric Improvement driver
value target
Do you want to:
Better alignment via increased
• Better align the budget with organizational objectives? Percentage of spend directly
communication and partnership 72% 90%
tied to an organizational goal.
• with the business.
Increase cost forecasting accuracy?
• Increase budget transparency and completeness? Better accuracy and transparency
Number of changes to budget
• Improve the effectiveness of your budget presentation? via use of zero-based budgeting 8 2
prior to final acceptance.
and enhanced stakeholder views.
• Reduce the amount of budget rework?
Improved forecasting through
• Increase the percentage of the budget that’s approved? Percentage variance between
better understanding of business +4% +/-2%
budgeted vs. actuals.
• Reduce variance between what was budgeted and actuals? plans and in-cycle show-back.
Improved business rationales and
Establish appropriate metrics and targets that will allow you to Percentage of budget approved
direct mapping of expenditure to 76% 95%
define success, track progress, and communicate achievement on after first presentation.
org priorities.
these higher-level goals.
More rigor around benefits, ROI
Check out some example metrics Percentage of IT-driven project
calculation, and quantifying 80% 100%
budget approved.
in the table to the right. value delivered.

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Set your high-level OpEx budget targets
The high-level targets you set now don’t need to be perfect. Think of them as reference points or guardrails to
sanity-check the cost forecasting exercise to come.
First things first: Zero-based or incremental for OpEx? Set your OpEx targets
Incremental budgeting is the addition of a few Zero-based budgeting involves rebuilding your Pick a range of percentage change based on
percentage onto next year’s budget, assuming the budget from scratch, i.e. zero. It doesn’t assume your business context and past spend.
previous year’s OpEx is all re-occurring. The that any of last year’s costs are recurring or • If economic prospects are negative, start
percentage often aligns with rates of inflation. consistent year to year. with a 0-3% increase to balance inflation
• This approach is harder because all relevant with potential cuts. Don’t set concrete
• Most organizations take this approach because
reduction targets at this point, to avoid
it’s faster and easier. historical spend data needs to be collected and
tunnel vision in the forecasting exercise.
reviewed, which not only takes time but the
• However, incremental budgeting is less data you need may be unlocatable. • If economic prospects are positive, target 3-
accurate. Non-recurring items are often 5% increases for stable scenarios and 6-10%
overlooked and get included in the forecast, • Every item needs to be re-examined, re- increases for growth scenarios.
resulting in budget bloat. Also, redundant or justified, and tied to an asset, service, or
• If CapEx from previous-year projects is
wasteful items can be entirely missed, project, which means it’s a far more
switching to steady-state OpEx, then
undermining any cost optimization efforts. comprehensive and accurate approach.
account for these bumps in OpEx.
• If the benefits from any previous-year
efficiency measures will be realized next
fiscal year, then account for these as OpEx
If cost-cutting or optimization is a priority, then a zero-based approach is the right decision. If doing this
reductions.
every year is too onerous, plan to do it for your OpEx at least every few years to examine what’s actually in
there, clean house, and re-set.
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Set your high-level CapEx budget targets
A lot of IT CapEx is conceived in business projects, so your proposed expenditure here may not be up to you.
Exercise as much influence as you can.
First things first: Is it project CapEx, or “business as usual” CapEx?

Project CapEx is tied to one-time strategic User-driven “business as usual” CapEx Network/data center-driven “business-as-
projects requiring investment in new assets. manifests via changes (often increases) in usual” CapEx is about core infrastructure
organizational headcount due to growth. maintenance.
• This CapEx will probably be variable year to
year, going up or down depending on the • Costs here focus on end-user hardware like • Costs here focus on the purchase of network
organization’s circumstances or goals. desktops, laptops, and peripherals. and data center hardware and other equipment
• Any new capital software acquisitions you have to maintain existing infrastructure services and
• This area of spend is driven largely by the planned will also be affected in terms of performance.
business and not IT. Plan to set project CapEx number of licenses required. • Increased outsourcing often drives down this
targets in close partnership with the business area of “business as usual” CapEx by reducing
and function as a steward of these funds instead • Get reliable estimates of department-by-
department hiring plans for next fiscal year to the purchase of new on-premises solutions and
of as an owner. eliminating network and data center
better account for these in your budget.
maintenance requirements.

Unanticipated hiring and the need to buy end-user hardware is cited as a top cause of budget grief by IT leaders – get ahead of this. Project CapEx, however, is
usually determined via business-based capital project approval mechanisms well in advance. And don’t forget to factor in pre-established capital asset
depreciation amounts generated by all the above!
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2.4 Set your high-level IT budget targets and metrics

8 hours
1. Download the IT Cost Forecasting and Budgeting Workbook to document Document this in the “Budget Targets & Metrics” table on the “Planning
the outcomes of this activity. Variables” tab in the IT Cost Forecasting and Budgeting Workbook. sed
on known capital projects, changes in headcount, typical “business as
2. Review the context in which your organization is currently operating and
usual” equipment expenditure, and pre-established capital asset
expects to operate in the next fiscal year. Specifically, look at:
depreciation amounts, set general project CapEx and non-project CapEx
a) The state of the economy. targets. Document these in the “Budget Targets & Metrics” table on the
b) Stated goals, objectives, and targets. “Planning Variables” tab in the IT Cost Forecasting and Budgeting
c) The executive’s point of view on budget increase requests. Workbook.

Document your factors, assessment, rationale, and considerations in the 4. Finally, set your overarching IT budget process success metrics. Also
“Business Context Assessment” table on the “Planning Variables” tab in document these in the “Budget Targets & Metrics” table on the “Planning
the IT Cost Forecasting and Budgeting Workbook. Variables” tab in the IT Cost Forecasting and Budgeting Workbook.

3. Based on the business context, anticipated flips of former CapEx to

OpEx, and realization of previous years’ efficiency measures, set a
general non-project OpEx target as a percentage increase or decrease for
next fiscal year to serve as a guideline in the cost forecasting guideline. Download the IT Cost Forecasting and
Budgeting Workbook

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2.4 Set your high-level IT budget targets and metrics

Input Output Materials Participants

• Knowledge of current • High-level project CapEx • IT Cost Forecasting and • Head of IT

business context and and non-project CapEx and Budgeting Workbook
• IT Financial Lead
probable context next fiscal OpEx targets for the next
• Whiteboard/flip charts
year fiscal year • Other IT Management
• Analysis of historical IT • IT budget process success
expenditure patterns metrics

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Phase recap: Get into budget-
starting position
Now you’re ready to do the deep dive into forecasting
your IT budget for next year.
In this phase, you clarified your business context and defined your budgetary goals,
including:
“We only have one dollar but
• Assembling your resources. You’ve built and organized your IT budgeting team, as well five things. Help us understand
as gathered the data and information you’ll need to do your historical expenditure analysis
and future forecasting how to spend that dollar.”
• Understanding the four views of the IT Cost Model. You’ve become familiar with the four – Trisha Goya, Director, IT Governance &
views of the model and have selected which ones you’ll map for historical analysis and Administration, Hawaii Medical Service Association
forecasting purposes.
• Reviewing last year’s budget versus actuals and five-year historical trends. You now have
the critical rationale-building context to inform next year’s numbers and demonstrate any
cost efficiencies you’ve successfully executed.
• Setting your high-level goals. You’ve established high-level targets for project and non-
project CapEx and OpEx, as well as set some IT budget process improvement goals.

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Phase 3
Develop Your Forecasts

Lay Your Get Into Budget-Starting Develop Your Build Your Create and Deliver Your
Foundation Position Forecasts Proposed Budget Presentation
1.1 Understand what your budget 2.1 Assemble your resources 3.1 Develop assumptions and 4.1 Aggregate your numbers 5.1 Plan your content
is alternative scenarios
2.2 Understand the four views of 4.2 Stress test your forecasts 5.2 Build your presentation
and does
the ITFM Cost Model 3.2 Forecast your project CapEx
4.3 Challenge and perfect your 5.3 Present to stakeholders
1.2 Know your stakeholders
2.3 Review last year’s budget vs. 3.3 Forecast your non-project rationales
5.4 Make final adjustments and
1.3 Pre-sell your budget all year actuals and five-year historical CapEx and OpEx
submit your IT budget
trends
2.4 Set your high-level goals

This phase will walk you through the following • Forecasting your non-project CapEx and OpEx. Create a Transparent and
activities:
This phase involves the following participants: Defensible IT Budget
• Documenting the assumptions behind your
• Head of IT
proposed budget and develop alternative scenarios.

• Forecasting your project CapEx. • IT Financial Lead

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• Other IT Management
Develop your forecasts
“Our April forecast sets the bar for what our
Start making some decisions. increase is going to be next fiscal year. We
needed to be more transparent and get that
This phase focuses on putting real numbers on paper based on the research and data you’ve forecast right because it’s the basis of
collected. Here, you will: deciding two percent, three percent, or
• Develop assumptions and alternative scenarios. The assumptions you make are the logical whatever that increase is going to be.
foundation for your decisions, and your primary and alternative scenarios focus your
thinking and demonstrate that you’ve thoroughly examined your organization’s current If we know that IT projects have been
and future context. delayed, if we know we pulled some things
• Forecast your project CapEx costs. These costs are comprised of all the project-related forward, if we know that a project isn’t
capital expenditures for strategic or capital projects, including in-house labor. starting until next year, let’s be really clear
about those things. This improvement in
• Forecast your non-project CapEx and OpEx costs. These costs are the ongoing “business
as usual” expenditures incurred via the day-to-day operations of IT and delivery of IT transparency and demonstration of diligence
services. with company investments has greatly
increased our collaboration with the
business.”
– Kristen Thurber, IT Senior Director, Donaldson Company

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When pinning down assumptions, start with negotiable and
non-negotiable constraints
Assumptions are things you hold to be true. They may not actually be true, but they are your logical foundation and must be
shared with stakeholders so they can follow your thinking.
Start with understanding your constraints. These are either negotiable (adjustable) or non-negotiable (non-adjustable). However, what is non-negotiable for
IT may be negotiable for the organization as a whole, such as its strategic objectives. Consider each of the constraints below, determine how it relates to IT
expenditure options, and decide if it’s ultimately negotiable or non-negotiable.

Organizational Legal and Regulatory IT/Other Example: You’re in year one of a

• Regulatory compliance and reporting • IT funding and fund allocation
three-year vendor contract. All
• Strategic goals and priorities
contracts are negotiable, but this one
• Financial and market performance • Data residency and privacy laws flexibility
isn’t for two years. This contact
• Governance style and methods • Vendor contract terms and conditions • Staff/skills availability and capacity should be considered a non-
• Organizational policies • Health and safety • Business continuity and IT negotiable for current budget-
• Organizational culture • Compensation and collective performance requirements planning purposes.
bargaining • Time and timeframes
Identifying your negotiable and non-negotiable constraints is about knowing what levers you can pull. Government entities have
more non-negotiable constraints than private companies, which means IT and the organization as a whole have fewer budgetary
levers to pull and a lot less flexibility.

An un-pullable lever and a pullable lever (and how much you can pull it) have one important thing in common – they are all
fundamental assumptions that influence your decisions.

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Brainstorm your assumptions even further
The tricky thing about assumptions is that they’re taken for granted – you don’t always realize you’ve made them. Consider
these common assumptions and test them for validity.

My current employees will still be here 18 months from now. My current vendors aren’t going to discontinue the products we have.

My organization’s executive team will be the same 18 months from now. My current key vendors will be around for years to come.

My organization’s departments, divisions, and general structure will be the same 18 months from now. IT has to be an innovation leader.

We won’t be involved in any merger/acquisition activity next fiscal year. IT has always played the same role here and that won’t change.

There won’t be a major natural disaster that takes us offline for days or even weeks. We must move everything we can to the cloud.

We won’t be launching any new products or services next fiscal year. Most of our IT expenditure has to be CapEx, as usual.

You won’t put some of these assumptions into your final budget presentation. It’s simply worthwhile knowing what
they are so you can challenge them when forecasting.
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Based on your assumptions, define the primary scenario
that will frame your budget
Your primary scenario is the one you believe is most likely to happen and upon which you’ll build your IT cost
forecasts.
A note on probability…
%
Now it’s time to outline your primary scenario.
• A scenario is created by identifying the variable factors embedded in • A non-negotiable constraint doesn’t have any
your assumptions and manipulating them across the range of variables to manipulate. It’s a 100% probability that
possibilities. This manipulation of variables will result in different must be rigidly accommodated and protected in your
scenarios, some more likely or feasible than others. scenario. An example is a long-standing industry regulation
• Your primary scenario is the one you believe is the most feasible and/or that shows no signs of being updated or altered and must be complied with
likely to happen (i.e. most probable). This is based on: in its current state.
• A negotiable constraint has many more variables in play. Your goal is to
o Your understanding of past events and patterns. identify the different potential values of the variables and determine the
o Your understanding of your organization’s current context. degree of probability that one value is more likely to be true or feasible than
o Your understanding of IT’s current context. another. An example is that you’re directed to cut costs, but the amount
could be as little as 3% or as much as 20%.
o Your understanding of the organization’s objectives.
• And then there are the unknowns. These are circumstances, events, or
o Your assessment of negotiable and non-negotiable constraints and initiatives that inevitably happen, but you can’t predict when, what, or how
other assumptions for both IT and the organization. much. This is what contingency planning and insurance are for. Examples
include a natural disaster, a pandemic, a supply chain crisis, or the CEO
simply changing their mind. Its safe to assume something is going to
What could or will be your organization’s new current state at the happen, so if you’re able to establish a contingency fund or mechanisms
end of next fiscal year? that let you respond, then do it.
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Next, explore alternative scenarios, even those that may seem
a bit outrageous
Offering alternatives demonstrates that you weighed all the pertinent factors and that you’ve thought broadly
about the organization’s future and how best to support it.
Primary scenario approval can be helped by putting that scenario alongside alternatives that are less
attractive due to their cost, priority, or feasibility. Alternative scenarios are created by manipulating or
eliminating your negotiable constraints or treating specific unknowns as knowns. Here are some common
alternative scenarios.
The high-cost scenario: Assumes very positive
economic prospects. Characterized by more of
everything – people and skills, new or more Target 10-20%
sophisticated technologies, projects, growth, and more expenditure
innovation. Remember to consider the long-term than your The dark horse scenario: This is a more
impact on OpEx that higher capital spend may primary scenario radical proposition that challenges the status quo.
bring in subsequent years. For example, what would the budget look like if
all data specialists in the organization were
centralized under IT? What if IT ran the corporate
The low-cost scenario: Assumes negative PMO? What if the entire IT function was 100%
economic prospects or cost-control objectives. outsourced?
Target 5-15%
Characterized by less of everything, specifically
less expenditure
capital project investment, other CapEx, and OpEx.
than your
Must assume that business service-level No specific target
primary scenario
expectations will be down-graded and other
sacrifices will be made.
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Case Study INDUSTRY SOURCE

Manufacturing Anonymous
A manufacturing IT Director gets budgetary approval by showing what
the business would have to sacrifice to get the cheap option.

Challenge Solution Results

A manufacturing business had been The IT Director got creative. He put He proceeded to review the things they
cutting costs endlessly across the together three complete budgets: wouldn’t have under the extreme
organization, but specifically in IT. outsourced scenario, including the
1. The budget he wanted.
losses in service levels that would be
IT was down to the bone. The IT 2. A budget where everything was necessary to make it happen.
Director had already been doing zero- entirely outsourced and there would
based budgeting to rationalize all be zero in-house IT staff. The executive was shocked by what the
expenditure, stretching asset lifecycles IT Director showed them.
as long as possible, and letting 3. A budget that was not as extreme as
the second one, but still tilted toward The executive immediately approved
maintenance work slide.
outsourcing. the IT Director’s preferred budget. He
There were no obvious options left to was able to defend the best budget for
reduce costs based on what the business In the budget presentation, he led with the business by showing them what they
wanted to do. the “super cheap” budget where IT was stood to lose.
100% outsourced.

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3.1 Document your assumptions and alternative scenarios

2 hours
1. Download the IT Cost Forecasting and Budgeting Workbook and
document the outcomes of this activity on Tab 9, “Alternative Scenarios.”
Input Output
2. As a management team, identify and discuss your non-negotiable and
negotiable constraints. Document these in rows 4 and 5 respectively in the • Knowledge of organization’s • A list of assumptions that will
Workbook. context, culture, and form the logical foundation of
3. Brainstorm, list, and challenge any other assumptions being made by IT or operations your forecasting decisions
the organization’s executive in terms of what can and cannot be done.
• Identification of the primary
4. Identify the most likely or feasible scenario (primary) and associated budget scenario and
assumptions. You will base your initial forecasting on this scenario. alternatives
5. Identify alternative scenarios. Document each scenario’s name,
description, and key assumptions, and major opportunities in columns B-D
on Tab 9, “Alternative Scenarios.” You will do any calculations for these Materials Participants
scenarios after you have completed the forecast for your primary scenario.

• Whiteboard/flip charts • Head of IT

• IT Financial Lead

Download the IT Cost Forecasting and • Other IT Management

Budgeting Workbook

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Before diving into actual forecasting, get clear on project and
non-project CapEx and OpEx
Traditional, binary “CapEx vs. OpEx”
distinctions don’t seem adequate for showing Includes all workforce and vendor costs associated with
where expenditure is really going. We’ve added planning and execution of projects largely focused on the
a new facet to help further differentiate one- Project CapEx acquisition or creation of new capital assets.
time project costs from recurring “business as
usual” expenses. Includes “business as usual” capital asset
acquisition in the interest of managing,
maintaining, or supporting ongoing
performance of existing infrastructure or
Includes all recurring, non-CapEx “business as Non-project Non-project services, such as replacement network
usual” costs such as labor compensation and OpEx CapEx equipment, end-user hardware (e.g. laptops),
training, cloud-based software fees, outsourcing or disaster recovery/business continuity
costs, managed services fees, subscriptions, and redundancies. Also includes ongoing asset
other discretionary spend. depreciation amounts.

Depreciation is technically CapEx. However, for practical purposes, most organizations list it under OpEx, which can cause it to get
lost in the noise. Here, depreciation is under non-project CapEx to keep its true CapEx nature visible and in the company of other
“business as usual” capital purchases that will ultimately join the depreciation ranks.

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Forecast your project CapEx costs
This process can be simple as far as overall budget forecasting is concerned. If it isn’t simple now, plan to make
it simpler next time around.

What to expect…
Project CapEx
• Ideally, the costs for all projects should have been thoroughly estimated, reviewed, and accepted by a
steering committee, your CFO, or other approving entity at the start of the budgeting season, and
funding already committed to. In a nutshell, forecasting your project costs should already have been
done and will only require plugging in those numbers.
• If projects have yet to be pitched and rubber stamped, know that your work is cut out for you. Doing
things in a rush or without proper due diligence will result in certain costs being missed. This means
Non-project Non-project
that you risk going far over budget in terms of actuals next year, or having to borrow from other areas in
OpEx CapEx
your budget to cover unplanned or underestimated project costs.

Key forecasting principles…

For more information about putting together sound business cases for different Develop rigorous business cases
projects and circumstances, see the following Info-Tech blueprints:
Secure funding approval well in advance
• Build a Comprehensive Business Case
• Fund Innovation with a Minimum Viable Business Case Tie back costs benefitting business units

• Reduce Time to Consensus with an Accelerated Business Case Consider the longer-term OpEx impact

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Apply these project CapEx forecasting tips
A good project CapEx forecast requires steady legwork, not last-minute fast thinking.

Tip #1: Don’t surprise your approvers. Springing a capital Tip #4: Capitalizing cloud costs in year one of a formal implementation project is
project on approvers at your formal presentation isn’t a good idea usually acceptable. It’s possible to continue treating cloud costs as CapEx with some
and stands a good chance of rejection, so do whatever you can to vendors via something called reserved instances, but organizations report that this is a
lock these costs down well in advance. lot of work to set up. In the end, most capitalized cloud will convert into non-project
OpEx in years two and beyond.
Tip #2: Project costs should be entirely comprised of CapEx if
possible. Keep in mind that some of these costs will convert to
depreciated non-project CapEx and non-project OpEx as they Tip #5: Build in some leeway. By the
transition from project costs to ongoing “business as usual” costs, time a project is initiated, circumstances
usually in the fiscal year following the year of expenditure. may have changed dramatically from
Project CapEx
Creating projections for the longer-term impacts of these project when it was first pitched and approved,
CapEx costs on future types of expenditure is a good idea. including business priorities and needs,
Remember that a one-time project is not the same thing as a one- vendor pricing, and skillset availability.
time cost. Your costing may become completely
out of date. It’s a good practice to work
Non-project Non-project within more general cost ranges than
Tip #3: Capitalize any employee labor costs on capital OpEx CapEx with specific numbers, to give you the
projects. This ensures the true costs of projects are not flexibility to respond and adapt during
underestimated and that operational staff aren’t being used for actual execution.
free at the expense of their regular duties.

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3.2 Forecast your project CapEx

Time: Depends on size of project portfolio

1. Download the IT Cost Forecasting and Budgeting Workbook and navigate
to Tab 5, “Project CapEx Forecast”. Add more columns as required. Enter Input Output
the following for all projects:
• Row 5 – Its name and/or unique identifier.
• Project proposals and plans, • A project CapEx forecast for
• Row 6 – Its known or estimated project start/end dates. including cost estimations next fiscal year
• Row 7 – Its status (in proposal, committed, or in progress).
2. Distribute each project’s costs across the categories listed for each view
you’ve selected to map. Do not include any OpEx here – it will be mapped
separately under non-project OpEx. Materials Participants
3. Rationalize your values. A running per-project total for each view, as well
as totals for all projects combined, are in rows 16, 28, 39, and 43. Ensure
these totals match or are very close across all the views you are mapping. • IT Cost Forecasting and • Head of IT
If they don’t match, review the views that are lower-end outliers as there’s Budgeting Workbook
a good chance something has been overlooked. • IT Financial Lead
• Whiteboard/flip charts
• Other IT Management

Download the IT Cost Forecasting and

Budgeting Workbook

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Forecast your non-project OpEx
Most of your budget will be non-project OpEx, so plan to spend most of your forecasting effort here.

What to expect…
Project CapEx
• Central to the definition of OpEx is the fact that it’s ongoing. It rarely stops, and tends to steadily increase
over time due to factors like inflation, rising vendor prices, growing organizational growth, increases in
the salary expectations of employees, and other factors.
• The only certain ways to reduce OpEx are to convert it to capitalizable expenditure, decrease staffing
costs, not pursue cloud technologies, or for the organization to simply not grow. For most organizations,
none of these approaches are feasible. Smaller scale efficiencies and optimizations can keep OpEx from
Non-project Non-project
running amok, but they won’t change its overall upward trajectory over time. Expect it to increase.
OpEx CapEx

Key forecasting principles…

Focus on optimization and efficiency.
For more information about how to make the most out of your IT OpEx, see the
following Info-Tech blueprints:
Aim for full spend transparency.
• Develop Your Cost Optimization Roadmap
Think about appropriate charge-back options.
• Achieve IT Spend & Staffing Transparency
• Discover the Hidden Costs of Outsourcing Give it the time it deserves.

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Apply these non-project OpEx forecasting tips
A good forecast is in the details, so take a very close look to see what’s really there.

Tip #1: Consider zero-based budgeting. You don’t have to do Tip #4: Spend time on your CIO service view forecast.
this every year, but re-rationalizing your OpEx every few years, Completing this view counts as a first step toward service-
or a just a segment of it on a rotational basis, will not only help based costing and is a good starting point for setting up an
you readily justify the expenditure but also find waste and accurate service catalog. If looking for cost reductions,
inefficiencies you didn’t know existed. you’ll want to examine your forecasts in this view as there
will likely be service-level reductions you’ll need to
Project CapEx propose to hit your cost-cutting goals.
Tip #2: Capitalize your employee capital project
work. While some organizations aren’t allowed to do
this, others who can simply don’t bother. Unfortunately,
this act can bloat the OpEx side of the equation Tip #5: Budget with consideration for charge-
substantially. Many regular employees spend a back. charge-back mechanisms for OpEx can be
significant amount of their time working on capital Non-project Non-project challenging to manage and have political
projects, but this fact is invisible to the business. This is OpEx CapEx repercussions, but they do shift accountability back
why the business keeps asking why it takes so many to the business, guarantee that the IT bills get paid,
people to run IT. and reduce IT’s OpEx burden. Selectively charging
business units for applications that only they use
may be a good entry point into charge-back. It may
Tip #3: Break out your cloud vs. on-premises costs. Burying cloud apps costs in a generic software also be as far as you want to go with it. Doing the
bucket works against any transparency ambitions you may have. If you have anything resembling a CXO business view forecast will provide insight
cloud strategy, you need to track, report, and plan for these costs separately in order to measure into your opportunities here.
benefits realization. This goes for cloud infrastructure costs, too.

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Forecast your non-project CapEx
These costs are often the smallest percentage of overall expenditure but one of the biggest sources of financial
grief for IT.

What to expect…
Project CapEx
• These costs can be hard to predict. Anticipating expenditure on end-user hardware such as laptops
depends on knowing how many new staff will be hired by the organization next year. Predicting the
need to buy networking hardware depends on knowing if, and when, a critical piece of equipment is
going to spontaneously fail. You can never be completely sure.
• IT often must reallocate funds from other areas of its budget to cover non-project CapEx costs.
Unfortunately, keeping the network running and ensuring employees have access to that network is seen
Non-project Non-project
exclusively as an IT problem, not a business problem. Plan to change this mindset.
OpEx CapEx

Key forecasting principles…

Discuss hiring plans with the business.
For more information about ensuring IT isn’t left in the lurch when it comes to non-
project CapEx, see the following Info-Tech blueprints:
Pay close attention to your asset lifecycles.
• Manage End-User Devices
Prepare to advise about depreciation schedules.
• Develop an Availability and Capacity Management Plan
• Modernize the Network Build in contingency for the unexpected.

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Apply these non-project CapEx forecasting tips
A good forecast relies on your ability to accurately predict the future.

Tip #1: Top up new Tip #2: Make an arrangement for who’s paying for operational technology (OT) Tip #3: Evaluate cloud
hire estimations: Talk devices and equipment. OT involves specialized devices such as in-the-field sensors, infrastructure and managed services.
to every business unit scanners, meters, and other networkable equipment. Historically, operational units These can dramatically reduce your
leader about their have handled this themselves, but this has created security problems and they still rely non-project CapEx, particularly on the
concrete hiring plans, on IT for support. Sort the financials out now, including whose budget device and network and data center fronts.
not their aspirations. equipment purchases appear on, as well as what accommodations IT will need to make However, these solutions aren’t
Get a number, increase in its own budget to support them. necessarily less expensive and will
that number by 25% or drive up OpEx, so tread cautiously.
20 FTEs (whichever is
less), and use this new
number to calculate Tip #4: Definitely do an inventory. If you haven’t invested in IT asset management, put it on
your end-user non- your project and budgetary agenda. You can’t manage what you don’t know you have, so asset
Project CapEx discovery should be your first order of business. From there, start gathering asset lifecycle
project CapEx.
information and build in alerting to aid your spend planning.

Tip #5: Think about retirement: What assets are nearing end Tip #6: Create a
of life or the end of their depreciation schedule? What impact is contingency fund:
Non-project Non-project this having on non-project OpEx in terms of maintenance and You need one to deal
OpEx CapEx support? Deciding to retire, replace, or extend an IT operational with surprises and
asset will change your non-project CapEx outlook and will emergencies, so why
affect costs in other areas. wait?

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Document the organization’s projected FTEs by business
function
This data point is usually missing from IT’s budget forecasting data set. Try to get it.
A powerful metric to share with business stakeholders is expenditure per employee or FTE. It’s powerful
because:
• It’s one of the few metrics that’s intuitively understood by most people
• It can show changes in IT expenditure over time at both granular and general levels.

This metric is one of the simplest to calculate. The challenge is in getting your hands on the data in the first
place.
• Most business unit leaders struggle to pin down this number in terms of actuals as they have difficulty
determining what an FTE actually is. Does it include contract staff? Part-time staff? Seasonal workers?
Volunteers and interns? And if the business unit has high turnover, this number can fluctuate significantly.
• Encourage your business peers to produce a rational estimate. Unlike the headcount number you’re seeking
to forecast for non-project capital expenditure for end-user hardware, this FTE number should strive to be
more in the ballpark, as you’re not using it to ensure sufficient funds but comparatively track expenditure
year to year.
• Depending on your industry, employees or FTEs may not be the best measurement. Use what works best for
you. Number of unique users is a common one. Other industry-specific examples include per student, per
bed, per patient, per account, and per resident.

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Start to build in long-term and short-term forecasting into
your budgeting process
These are growing practices in mature IT organizations that afford significant flexibility.

Short-term forecasting: Long-term forecasting:

• At Donaldson Company, budgeting is a once-a-year event, but • In 2017, the Hawaii Medical Service Association accepted the fact
they’ve started formalizing a forecast review three times a year. that they were very challenged with legacy systems. They needed to
modernize.
• These mini-forecasts are not as full blown as the annual forecasting
process. Rather, they look at specific parts of the budget and update • They created a multi-year strategic budget -- a five-year investment
it based on changing realities. plan. This plan was a success. They were able to gain approval for a
five-year horizon with variable allocations per year, as required.
“It’s a great step in the right direction. We look at
the current, and then the future. What we’re really pushing is how
to keep that outyear spend more in discussion. The biggest thing “This approach was much better. We now
we’re trying to do when we approve projects is look at what does have a ‘guarantee’ of funding for five years – they’ve conceptually
that approval do to outyear spend? Is it going to increase? Is it agreed. Now we don’t have
going to decrease? Will we be spending more on licensing? On to make that request for new money every time
people?” if we need more. We can vary the amount every
– Kristen Thurber, IT Senior Director, year – it doesn’t have to be the same.” .”
Donaldson Company – Trisha Goya, Director, IT Governance & Administration,
Hawaii Medical Service Association
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3.4 Forecast your non-project OpEx and CapEx

Time: Depends on size of vendor portfolio and workforce

Input Output
1. Download the IT Cost Forecasting and Budgeting Workbook and navigate
to Tab 4, “Business as Usual Forecast”. This tab assumes an incremental
budgeting approach. Last year’s actuals have been carried forward for you • Last fiscal year’s actuals • A non-project OpEx and
to build upon.
CapEx forecast for next fiscal
• Knowledge of likely inflation,
2. Enter expected percentage-based cost increases/decreases for next fiscal year
vendor cost, and salary
year for each of the following variables (columns E-I): inflation, vendor
pricing, labor costs, service levels, and depreciation. Do this for all sub- expectations for next fiscal
categories for the ITFM cost model views you’ve opted to map. Provide year
rationales for your percentage values in column K. • Depreciation amounts
3. In columns M and N, enter the anticipated percentage allocation of cost to
non-project CapEx versus non-project OpEx.
4. In column O, rows 29-38, enter the projected FTEs for each business
Materials Participants
function (if available).
5. If you choose, make longer-term, high-level forecasts for 2-3 years in the • Whiteboard/flip charts • Head of IT
future in columns P-U. Performing longer-term forecasts for at least the
CFO expense view categories is recommended. • IT Financial Lead
• Other IT Management
Download the IT Cost Forecasting and
Budgeting Workbook
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Case Study INDUSTRY SOURCE

Insurance Anonymous
Doing the IT budget properly comes as a
shock to IT and Finance staff alike.

Challenge Solution Results

In his first run at the annual budgeting In his budget, the CIO requested a 22- Simply put, the organization hadn’t taken
process, a new CIO received delivery dates 24% increase in IT expenditure to deal budgeting seriously. By doing it right, the
from Finance and spent the next three with the critical gaps, and provided a new CIO had inadvertently challenged the
months building the budget for the next detailed defense of his proposal status quo.
fiscal year. But the new CIO’s team and Finance The CIO ended up under-executing his
He discovered that the organization had been were frustrated with him. He asked his IT first budget by 12% but is tracking closer
underinvesting in IT for a long time. There finance leader why. She said she didn’t to plan this year. Significantly, he’s been
were platforms without support, no understand what his direction was and able cut critical incidences from 20 down
accounting for currency exchange rates on why the budgeting process was taking so to only 2-3 per month.
purchases, components that had not be long – his predecessor did the budget in Some friction persists with the CFO, who
upgraded in 16 years, big cybersecurity risks, only two days. He would add up the sees him as a “big spender,” but he
and 20 critical incidences a month. contracts, add 10% for inflation, and believes that this friction has forced him to
that’s it. be even better.

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Phase recap: Develop your forecasts

The hard math is done. Now it’s time to step back and “Ninety percent of your projects
craft your final proposed budget and its key messages. will get started but a good 10%
will never get off the ground
This phase focused on developing your forecasts and proposed budget for next fiscal year. It because of capacity or the
included:
• Developing assumptions and alternative scenarios. These will showcase your
business changes their mind or
understanding of business context as well as what’s most likely to happen (or should other priorities are thrown in.
happen) next year.
• Forecasting your project CapEx costs. If these costs weren’t laid out already in formal, There are always these sorts of
approved project proposals or plans, now you know why it’s the better approach for challenges that come up.”
developing a budget.
• Forecasting your non-project CapEx and OpEx costs. Now you should have more clarity – Theresa Hughes, Executive Counselor,
and transparency concerning where these costs are going and exactly why they need to go Info-Tech Research Group
there. and Former IT Executive

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Phase 4
Build Your Proposed Budget

Lay Your Get Into Budget-Starting Develop Your Build Your Create and Deliver Your
Foundation Position Forecasts Proposed Budget Presentation
1.1 Understand what your budget 2.1 Assemble your resources 3.1 Develop assumptions and 4.1 Aggregate your numbers 5.1 Plan your content
is alternative scenarios
2.2 Understand the four views of 4.2 Stress test your forecasts 5.2 Build your presentation
and does
the ITFM Cost Model 3.2 Forecast your project CapEx 4.3 Challenge and perfect your 5.3 Present to stakeholders
1.2 Know your stakeholders
2.3 Review last year’s budget vs. 3.3 Forecast your non-project rationales
5.4 Make final adjustments and
1.3 Pre-sell your budget all year actuals and five-year historical CapEx and OpEx submit your IT budget
trends
2.4 Set your high-level goals

This phase will walk you through the following • Fine tuning the rationales behind your proposals. Create a Transparent and
activities:
This phase involves the following participants: Defensible IT Budget
• Pulling your forecasts together into a
• Head of IT
comprehensive IT budget for next fiscal year.

• Double checking your forecasts to ensure they’re • IT Financial Lead

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accurate. • Other IT Management
Build your proposed budget

Triple check your numbers and put the finishing touches on your “We don’t buy servers and licenses
approval-winning rationales. because we want to. We buy them
because we have to. IT doesn’t need
This phase is where your analysis and decision making finally come together into a coherent
budget proposal. Key steps include: those servers out at our data center
• Aggregating your numbers. This step involves pulling together your project CapEx, non- provider, network connections, et
project CapEx, and non-project OpEx forecasts into a comprehensive whole and sanity- cetera. Only a fraction of these costs
checking your expenditure-type ratios.
are to support us in the IT department.
• Stress-testing your forecasts. Do some detailed checks to ensure everything’s accounted
for and you haven’t overlooked any significant information or factors that could affect IT doesn’t have control over these
your forecasted costs. costs because we’re not the
• Challenging and perfecting your rationales. Your ability to present hard evidence and consumers.”
rational explanations in support of your proposed budget is often the difference between a
yes or a no. Look at your proposals from different stakeholder perspectives and ask – Matt Johnson, IT Director Governance and
Business Solutions, Milwaukee County
yourself, “Would I say yes to this if I were them?”

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Great rationales do more than set you up for streamlined
budgetary approval
Rationales build credibility and trust in your business capabilities. They can also help stop the same
conversations happening year after year.
Any item in your proposed budget can send you down a rabbit hole if not
thoroughly defensible.
You probably won’t need to defend every item, but it’s best to be prepared to do so. Ask yourself:
• What areas of spend does the CFO come back to year after year? Is it some aspect of OpEx, such as
workforce costs or cloud software fees? Is it the relationship between proposed project spend and “Budgets get out of control when one
business benefits? Provide detailed and transparent rationales for these items to start re-directing department fails to care for the
long-term conversations to more strategic issues. implications of change within another
• What areas of spend seem to be recurring points of conflict with business unit leaders? Is it surprise department's budget. This wastes time,
spend that comes from business decisions that didn’t include IT? Is it business-unit leaders railing reduces accuracy and causes conflict.”
against charge-back? Have frank, information-sharing conversations focused on business
applications, service-level requirements, and true IT costs to support them. – Tara Kinney, Atomic Revenue, LLC.
• What’s on the CEO’s mind? Are they focused on entering a new overseas market, which will require
capital investment? Are they interested in the potential of a new technology because competitors are
adopting it? It may not be the same focus as last year, so ensure you have fresh rationales that show
how IT will help deliver on these business goals.

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Rationalizing costs depends on the intention of the spend

Not all spending serves the same purpose. Some types require deeper “Approval came down to ROI and the
or different justifications than others. ability to show benefits realization for years one, two,
and three through five.”
For the business, there are two main purposes for spend:
– Duane Cooney, Executive Counselor, Info-Tech Research Group,
and Former Healthcare CIO

Spending that drives Think in terms of return on investment (ROI),

1 revenues or the
customer experience.
i.e. when will the expenditure pay for itself via
the revenue gains it helps create? What are the
Is the spend new or
What’s the What are potential
assumptions that likelihood of obstacles to
a reallocation (and
went into the realizing returns or realizing returns or
Think in terms of cost-benefit, i.e. what are the from where)?
Spending that mitigates calculation? benefits? benefits?
2 and manages risk.
costs of doing something versus doing nothing
at all?

Source: Kris Blackmon, NetSuite Brainyard. Regardless of its ultimate purpose, all expenditure needs statements of
assumptions, obstacles, and likelihood of goals being realized behind it.

Rationales aren’t only for capital projects – they can and should be applied to all proposed OpEx and CapEx. Business project
rationales tend to drive revenue and the customer experience, demanding ROI calculations. Internal IT-projects and non-project
expenditure are often focused on mitigating and managing risk, requiring cost-benefit analysis.

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First, make sure your numbers add up
There are a lot of numbers flying around during a budgeting process. Now’s the time to get out of the weeds,
look at the big picture, and ensure everything lines up.

Overall Non-Project OpEx Non-Project CapEx Project CapEx

• Is your proposed budget • Did you research and verify • Do you have accurate • Is funding for all capital projects
consistent with previous IT market rates for employees and depreciation amounts and represented reliable, i.e. has it
expenditure patterns? skill sets? timeframes for their been approved?
• Did you account for major • Did you research and verify discontinuation? • Are all in-progress, proposed, or
known anomalies or events? likely vendor pricing and • Are any variances driven by committed project CapEx costs
• Is your final total in line with potential increases? confirmed business plans to backed up with reliable estimates
your CFO’s communicated • Are cost categories with increase headcount, necessitating and full project documentation?
targets and expectations? variances greater than +5% purchase of end-user hardware • Do capital project costs include
backed up by defensible IT and on-premises software the capitalizable costs of
• Are your alternative scenarios licenses?
realistic and reflective of viable hiring plans or documented employees working on those
economic contexts that your operational growth or • Are any variances due to net-new projects, and were these amounts
organization could find itself in improvement initiatives? planned/contingency purchases deducted from non-project
in the near term? • Have you accounted for the or the retirement of depreciable OpEx?
absorption of previous capital on-premises equipment? • Have you estimated the longer-
• Are the OpEx-to-CapEx ratios
sensible? project costs into day-to-day term OpEx impact of your
management, maintenance, and current capital projects?
• Does it pass your gut check? support operations?

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4.1 Aggregate your proposed budget numbers and stress test
your forecasts
2 hours
1. Download the IT Cost Forecasting and Budgeting Workbook for this
activity. If you have been using it thus far, the Workbook will have Input Output
calculated your numbers for you across the four views of the ITFM Cost
Model on Tab 7, “Proposed Budget”, including:
a) Forecasted non-project OpEx, non-project CapEx (including • Final drafts of all IT cost • A final proposed IT budget
depreciation values), project CapEx, and total values. forecasts

b) Numerical and percentage variances from the previous year.

2. Test and finalize your forecasts by applying the questions on the previous
slide.
Materials Participants
3. Flag cost categories where large variances from the previous year or large
numbers in general appear – you will need to ensure your rationales for
these variances are rigorous in the next step.
• IT Cost Forecasting and • Head of IT
4. Make amendments if needed to Tabs 4, “Business as Usual Forecast” and Budgeting Workbook
5, “Project CapEx Forecast” in the IT Cost Forecasting and Budgeting • IT Financial Lead
Workbook. • Whiteboard/flip charts
• Other IT Management

Download the IT Cost Forecasting and

Budgeting Workbook

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Case Study INDUSTRY SOURCE

Healthcare Anonymous
Building a thorough business case can uncover concrete
benefits that no one had imagined.

Challenge Solution Results

A senior nursing systems director needed The CIO worked with the director to The senior nursing systems director
the CIO’s help. She wanted to get a do the math. In only a few hours, they presented to her peers and leadership,
project off the ground, but it wasn’t realized that the savings from and eventually to the Board of
getting priority or funding. rewriting the workflows would allow Directors. The Board immediately saw
Nurses were burning out. Many were them to hire over 500 full-time nurses. the benefits and promoted the project to
staying one to two hours late per shift to first on the list ahead of all other
The benefits realized would not only
catch up on patient notes. Their EHR projects.
help reduce nurse workload and
platform had two problematic workflows, generate savings, but also increase the This collaborative approach to
each taking up to about 15 minutes per amount of time spent with patients generating project benefits statements
nurse per patient to complete. These and number of patients seen overall. helped the CIO gain trust and pave the
workflows were complex, of no value, They redid the math several times to way for future budgets.
and just not getting done. She needed a ensure they were right.
few million dollars to make the fix.

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The strength of your rationales will determine how readily
your budget is approved
When proposing expenditure, you need to thoroughly consider the organization’s goals, its governance culture,
and the overall feasibility of what’s being asked.
First, recall what budgets are really about.
The completeness, accuracy, and granularity of your numbers and thorough ROI Business goals
calculations for projects are essential. They will serve you well in getting the CFO’s What are the organization’s
attention. However, the numbers will only get you halfway there. Despite what some strategic priorities?
people think, the work in setting a budget is more about the what, how, and why – that
is, the rationale – than about the how much.

Next, revisit Phase 1 of this blueprint and review: Governance culture

• Your organization’s budgeting culture and processes. How constrained is the
decision-making process?
• The typical accountabilities, priorities, challenges, opportunities, and expectations
associated with your CFO, CEO, and CXO IT budget stakeholders.
• Your budgetary mandate as the head of IT.
Feasibility
Then, look at each component of your proposed budget through each of these Can we make it happen?
three rationale-building lenses.

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Linking proposed spend to strategic goals isn’t just for
strategic project CapEx
Tie in your “business as usual” non-project OpEx and CapEx, as well.
Lifecycle position Opportunities
Context
Business goals The stage the organization Context and lifecycle Tie every element in
This is all about external
What are the is at in terms of growth, position determine your proposed budget
factors, namely the broader
organization’s stability, or decline will opportunities, which are
economic, political, and to an organizational
strategic drive decisions, priorities, often defined in terms of
industry contexts in which goal.
priorities? and the ability to spend or potential cost savings
the organization operates.
invest. or ROI.

Non-project OpEx Non-project CapEx Project CapEx

• Remember that OpEx is what comes from the • Know the impact of any business growth goals • Challenge business-driven CapEx projects if
realization of past strategic goals. If that past on future headcount – this is essential to they don’t directly support stated goals.
goal is still valid, then the OpEx that keeps that rationalize laptop/desktop and other end-user • Ideally, the goal-supporting rationales for
goal alive is, too. hardware spend. software, hardware, and workforce CapEx have
• Business viability and continuity are often • Position infrastructure equipment spend in been laid out in an already-approved project
unexpressed goals. OpEx directly supports terms of having sufficient capacity to support proposal. Refer to these plans.
these goals. growth goals as well as ensuring • If pitching a capital project at the last minute,
• Periodically apply zero-based budgeting to network/system reliability and continuity. especially an IT-driven one, expect a “no”
OpEx to re-rationalize and identify waste. • Leverage depreciation schedules as backup. regardless of how well it ties to goals.

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Your governance culture will determine what you need to
show and when you show it
The rigor of your rationales is entirely driven by “how things are done around here.”
Risk tolerance Control
Speed to action
Governance Culture This is the organization’s Control manifests in the Ensure all parts of
willingness to be flexible, number and nature of rules How quickly decisions are
How rigorous/ your proposed budget
take chances, make and how authority and made and executed upon is
constrained
is decision- change, and innovate. It is accountability are determined by the amount align with what’s
often driven by legal and centralized or distributed in of consultation and number tolerated and allowed.
making?
regulatory mandates. the organization. of approval steps.

Non-project OpEx Non-project CapEx Project CapEx

• Don’t hide OpEx. If it’s a dirty word, put it • Treat non-project CapEx in the same way as • If your organization is risk-averse, highly
front and center to start normalizing it. you would non-project OpEx. centralized, or slow to act, don’t expect IT to
• As with business goals, position OpEx as • IT must make purchases quickly in this area of win approval for innovative capital projects.
necessary for business continuity and risk spend, but drawn-out procurement processes Let the business make any pitches and have IT
mitigation, as well as the thing that keeps long- can make this impossible. Consider including a serve in a supporting role.
term strategic goals alive. separate proposal to establish a policy that • Capital projects are often committed to 6-12
• Focus on efficiency and cost control, both in gives IT the control to make end-user and months in advance and can’t be completed
terms of past and future initiatives, regardless network/data center equipment purchases faster within a fiscal year. Nudge the organization
of the governance culture. and easier. toward longer-term, flexible funding.

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No matter which way your goals and culture lean, ground all
your rationales in reality
Objective, unapologetic facts are your strongest rationale-building tool.
Funding Capabilities Risk
Feasibility
The ultimate determinant of Success hinges on both the Risk is not just about Vet every part of your
Can we do it, feasibility is the availability, availability and accessibility obstacles to success and
and what proposed budget to ensure
quantity, and reliability of of required skills and what could happen if you do what you’re asking for is
sacrifices will funding next fiscal year and knowledge to execute on a something – it’s also about
we have to spend plan in the required what could happen if you do both realistic and possible.
over the long term to
make? support investment. timeframe. nothing at all.

Non-project OpEx Non-project CapEx Project CapEx

• Point out your operational waste-reduction and • This is a common source of surprise budget • Be sure IT is involved with every capital
efficiency-gaining efforts in hard, numerical overage, and IT often sacrifices parts of its project proposal that has a technological
terms. OpEx budget to cover it. Shed light on this implication (which is usually all of them).
• Clearly demonstrate that OpEx cannot be problem and define IT’s boundaries. • Specifically, IT should take on responsibility
reduced without sacrifices on the business side, • A core infrastructure equipment contingency for tech vendor evaluation and negotiation.
specifically in terms of service levels. fund and a policy mandating business units pay Never leave this up to the business.
• Define OpEx impacts for all CapEx proposals for unbudgeted end-user tech due to unplanned • Ensure IT gains funding for supporting any
to ensure funding commitments include long- or uncommunicated headcount increases are technologies acquired via a capital planning
term maintenance and support. worth pursuing. process, including hiring if necessary.

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Double-check to ensure your bases are covered
Detailed data and information checklist: High-level rationale checklist:
I have the following data and information for each item of I have done the following thinking and analysis for each item of
proposed expenditure: proposed expenditure:
• Sponsors, owners, and/or managers from IT and the business. • Considered it in the context of my organization’s broader operating
• CapEx and OpEx costs broken down by workforce environment and the constraints and opportunities this creates.
(employees/contract) and vendor (software, hardware, services) at a • Tied it – directly or indirectly – to the achievement or sustainment of
minimum for both last fiscal year (if continuing spend) and next fiscal current or past (but still relevant) organizational goals.
year to demonstrate any changes. • Understood my organization’s tolerances, how things get done, and
• Projected annual costs for the above, extending two to five years into whether I can win any battles that I need to fight given these realities.
the future, with dates when new spending will start, known • Worked with business unit leaders to fully understand their plans and how
depreciations will end, and CapEx will transition to OpEx. IT can support them.
• Descriptions of any tradeoffs or potential obstacles. • Obtained current, verifiable data and information and have a good idea if,
• Lifespan information for new, proposed assets informing depreciation when, and how this information may change next year.
scheduling. • Assessed benefits, risks, dependencies, and overall feasibility, as well as
• Sources of funding (especially if new, transferred, or changed). created ROI statements where needed.
• Copies of any research used to inform any of the above. • Stuck to the facts and am confident they can speak for themselves.

For more on creating detailed business cases for projects and investments, see Info-Tech’s comprehensive
blueprint, Build a Comprehensive Business Case.

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4.2 Challenge and perfect your rationales

2 hours
1. Based on your analysis in Phase 1, review your organization’s current and
near-term business goals (context, lifecycle position, opportunities), Input Output
governance culture (risk tolerance, control, speed to action), and feasibility
(funding, capabilities, risk) to understand what’s possible, what’s not, and
your general boundaries. • Final drafts of all IT cost • Fully rationalized proposed
2. Review your proposed budget in its current form and flag items that may forecasts, including rationales IT budget for next fiscal year
be difficult or impossible to sell, given the above.
3. Systematically go through each item in you proposed budget and apply the
detailed data and information and high-level rationale checklists on the
previous slide to ensure you have considered it from every angle and have Materials Participants
all the information you need to defend it.
4. Track down any additional information needed to fill gaps and fine-tune
your budget based on any discoveries, including eliminating or adding • IT Cost Forecasting and • Head of IT
elements if needed.
Budgeting Workbook
• IT Financial Lead
• Whiteboard/flip charts
• Other IT Management
Download the IT Cost Forecasting and
Budgeting Workbook

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Phase recap: Build your proposed
budget
You can officially say your proposed IT budget is done. Now
for the communications part. “Current OpEx is about
This phase is where everything came together into a coherent budget proposal. supporting and aligning with past
You were able to:
business strategies. That’s
• Aggregate your numbers. This involved pulling for project and non-project
CapEx and OpEx forecasts into a single proposed IT budget total. alignment. If the business wants
• Stress-test your forecasts. Here, you ensured that all your numbers were to give up on those past business
accurate and made sense.
• Challenge and perfect your rationales. Finally, you made sure you have all
strategies, that’s up to them.”
your evidence in place and can defend every component in your proposed IT – Darin Stahl, Distinguished Analyst and Research
budget regardless of who’s looking at it. Fellow, Info-Tech Research Group

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Phase 5
Create and Deliver Your Presentation

Lay Your Get Into Budget-Starting Develop Your Build Your Create and Deliver Your
Foundation Position Forecasts Proposed Budget Presentation
1.1 Understand what your budget 2.1 Assemble your resources 3.1 Develop assumptions and 4.1 Aggregate your numbers 5.1 Plan your content
is alternative scenarios
2.2 Understand the four views of 4.2 Stress test your forecasts 5.2 Build your presentation
and does
the ITFM Cost Model 3.2 Forecast your project CapEx 4.3 Challenge and perfect your 5.3 Present to stakeholders
1.2 Know your stakeholders
2.3 Review last year’s budget vs. 3.3 Forecast your non-project rationales
5.4 Make final adjustments and
1.3 Pre-sell your budget all year actuals and five-year historical CapEx and OpEx submit your IT budget
trends
2.4 Set your high-level goals

This phase will walk you through the following • Presenting, finalizing, and submitting your budget. Create a Transparent and
activities:
This phase involves the following participants: Defensible IT Budget
• Planning the content you’ll include in your budget
• Head of IT
presentation.

• Pulling together your formal presentation. • IT Financial Lead

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• Other IT Management
Create and deliver your presentation

Pull it all together into something you can show your approvers
and stakeholders and win IT budgetary approval. In many organizations, the
numbers can be pulled together
This phase focuses on developing your final proposed budget presentation for delivery to and presented in only a few days.
your various stakeholders. Here you will:
It’s the good work of talking with
• Plan your final content. Decide the narrative you want to tell and select the visualizations
and words you want to include in your presentation (or presentations) depending on the the business, understanding their
makeup of your target audience.
needs, and getting their buy-in
• Build your presentation. Pull together all the key elements in a PowerPoint template in a
way that best tells the IT budget story. that’s the truly time-consuming
• Present to stakeholders. Deliver your IT budgetary message. part of the budgeting process.
• Make final adjustments and submit your budget. Address any questions, make final
changes, and deconstruct your budget into the account categories mandated by your
Finance Department to plug into the budget template they’ve provided.

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The content you select to present depends on your objectives
and constraints
Info-Tech classifies potential content according to three basic types: mandatory, recommended, and optional.
What’s the difference?
Mandatory: Just about every CFO or Recommended: This information builds on Optional: This is very detailed information
approving body will expect to see this the mandatory elements, providing more depth that provides alternative views and serves as
information. Often high level in nature, it and detail. Inclusion of recommended content reinforcement of your key messages. Consider
includes: depends on: including it if:
• A review of last year’s performance. • Availability of the information. • You need to bring fuller transparency to a
murky IT spending situation.
• A comparison of proposed budget totals to • Relevance to a current strategic focus or
last year’s actuals. overarching initiative in the organization. • Your audience is open to it, i.e. it wouldn’t
be seen as irrelevant, wasting their time, or
• A breakdown of CapEx vs. OpEx. • Known business interest in the topic, or the a cause of discord.
topic’s ability to generate interest in IT
• A breakdown of proposed expenditure budgetary concerns in general. • You have ample time during your
according to traditional workforce and presentation to dive into it.
vendor costs.

Deciding what to include or exclude depends 100% on your target audience. What will fulfill their basic information needs as well as
increase their engagement in IT financial issues?

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Revisit your assumptions and alternative scenarios first

These represent the contextual framework for your proposal and explain why you made the decisions you did.

Stating your assumptions and presenting at least two alternative scenarios helps Target timeframe for presentation: 2 minutes
in the following ways:
Key objectives: Setting context, demonstrating breadth of
1. Identifies the factors you considered when setting budget targets and proposing thought.
specific expenditures, and shows that you know what the important factors are.
Potential content for section:
2. Lays the logical foundation for all the rationales you will be presenting.
• List of assumptions for the budget being presented
3. Demonstrates that you’ve thought broadly about the future of the organization and (primary target scenario).
how IT is best able to support that future organization regardless of its state and
circumstances. • Two or more alternative scenarios.

Your assumptions and alternative scenarios may not appear back-to-back in your
presentation, yet they’re intimately connected in that every unique scenario is based “Things get cut when the business
on adjustments to your core assumptions. These tweaks – and the resulting scenarios doesn’t know what something is,
– reflect the different degrees of probability that a variable is likely to land on a
certain value (i.e. an alternative assumption). doesn’t recognize it, doesn’t understand it. There
needs to be an education.”
Your primary scenario is the one you believe is most likely to happen and is
– Angie Reynolds, Principal Research Director, ITFM Practice,
represented by the complete budget you’re recommending and presenting. Info-Tech Research Group,

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 See Tabs “Planning Variables” and
9, “Alternative Scenarios” in your

Select your assumptions and scenarios

IT Cost Forecasting and
Budgeting Workbook for these
outputs.

Core assumptions Primary target scenario Alternative scenarios Full alternative scenario budgets

List Slide Slide Budget

Mandatory: This is a listing of both Mandatory: Emanating from your Recommended: Two alternatives are Optional: This is a lot of work, but
internal and external factors that are core assumptions, this scenario is a typical, with one higher spend and some IT leaders do it if an alternative
most likely to affect the challenges high-level statement of goals, initial one lower spend than your target. scenario is a strong contender or is
and opportunities your organization budget targets, and proposed budget The state of the economy and necessary to show that a proposed
will have and how it can and will based on your core assumptions. funding availability are the direction from the business is costly
operate. This includes negotiable and assumptions usually tweaked. More or not feasible.
non-negotiable internal and external radical scenarios, like the cost and
constraints, stated priorities, and the implications of completely
expression of known risk factors. outsourcing IT, can also be explored.

Factor Assessment Rationale Considerations

Global recession appears imminent. Affects will be felt by the Need to examine how to flexibly activate moderate reductions
State of economy Slowdown
organization indirectly in the mid-term. at short notice.

Sales and supporting IT services will not be touched by Last Fiscal to Next
Primary organizational Revenues are a priority to minimize impact of Last Fiscal Year Next Fiscal Year Last Fiscal to Next Next Fiscal Year
Generate profit potential cuts -- investment may actually accelerate. Will need Metric Fiscal Proposed Rationale
objective slowdown/recession. Actual Values Target Value Fiscal Target Variance Proposed Value
to look elsewhere for cost reduction oppportunities. Variance

Overall net decrease projected due to large reduction in non-

Overall actuals $19,800,220.00 $19,600,000.00 -1.0% $19,571,400.42 -1.2%
project CapEx.
Review modernization initiatives and downscale scope to both
Keep the lights on - Shore up and resolve any outstanding performance issues to
Primary IT objective fasttrack most critical priorities and also reduce near-term Inflation, vendor price increases, and workforce market values
operational excellence ensure system stability and current levels of performance. Non-project OpEx actuals $12,606,323.25 $13,100,000.00 3.9% $13,095,374.56 3.9% will drive increases in excess of 3%. This will be offset by a
costs.
series of planned software rationalizations and consolidations.
A large volume of software and infrastructure capital assets are
Non-project CapEx actuals $2,464,136.00 $1,200,000.00 -51.3% $1,180,494.85 -52.1% reaching the end of their depreciation cycles. Many will be
The most prudent approach is to balance inflation-driven retired and replaced with cloud-based OpEx solutions.
Current inflation rates will make what we keep signficantly more
IT budget impact Same increases with offsetting cuts to arrive at a 0% change in the IT Several large-scale capital projects in progress or in
expensive next fiscal year, so decrease not possible.
budget. Project CapEx actuals $4,729,760.75 $5,300,000.00 12.1% $5,295,531.00 12.0% commitment. Also ensuring that we're capturing all employee
capital project work as CapEx.

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The first major section of your presentation will be a
retrospective
Plan to kick things off with a review of last year’s results, factors that affected what transpired, and longer-term
historical IT expenditure trends.
This retrospective on IT expenditure is important for three reasons: Target timeframe for presentation: 7 minutes
1. Clarifying definitions and the different categories of IT expenditure. Key objectives: Definitions, alignment, expectations-
setting.
2. Showing your stakeholders how, and how well you aligned IT expenditure with
business objectives. Potential content for section:
3. Setting stakeholder expectations about what next year’s budget will look like based • Last fiscal year budgeted vs. actuals
on past patterns.
• Expenditure by type
You probably won’t have a lot of time for this section, so everything you select to share
should pack a punch and perform double duty by introducing concepts you’ll need your • Major capital projects completed
stakeholders to have internalized when you present next year’s budget details. • Top vendor spend
• Drivers of last year’s expenditures and efficiencies
“If they don’t know the consequences of their actions, how are they ever • Last fiscal year in in detail (expense view, service
going to change their actions?” view, business view, innovation view)
– Angela Hintz, VP of PMO & Integrated Services, • Expenditure trends for the past five years
Blue Cross and Blue Shield of Louisiana

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 See Tabs 1 “Historical Events &
Projects,” 3 “Historical Analysis,”
and 6 “Vendor Worksheet” in your

Start at the highest level IT Cost Forecasting and

Budgeting Workbook for these
outputs.

Mandatory: Demonstrates the variance

Total budgeted vs. between what you budgeted for last year
Graph
total actuals and what was actually spent. Explaining
causes of variance is key.
Mandatory: Provides a comparative
breakdown of last year’s expenditure by
Total actuals by non-project OpEx, non-project CapEx, and
Graph
expenditure type project CapEx. This offers an opportunity
to explain different types of IT expenditure
and why they’re the relative size they are.
Major capital Mandatory: Illustrates progress made
List
projects completed toward strategically important objectives.
Recommended: A list of vendors that
incurred the highest costs, including their
relative portion of overall expenditure.
Top vendors List These are usually business software
vendors, i.e. tools your stakeholders use
every day. The number of vendors shown Vendor
Last Year's Total Last Year's % of Total
Vendor Expenditure Vendor Expenditure
is up to you. Advanced Acme $2,600,300.00 20.44%
EverythingDesktop $1,255,613.00 9.87%
ConsultingPro $1,050,000.00 8.26%
TotalCRM 5 $826,745.00 6.50%
Supertel $727,350.00 5.72%
LinePro Ltd. $715,320.00 5.62%
KnowAll Consulting $645,000.00 5.07%
HR123 $614,308.00 4.83%
KickCo $499,315.00 3.93%
Superior SFA Ltd. $455,423.00 3.58%

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 See Tab 1, “Historical Events &
Projects” in your IT Cost

Describe drivers of costs and savings Forecasting and Budgeting

Workbook for these outputs.

Mandatory: A list of major events, circumstances,

business decisions, or non-negotiable factors that
Cost drivers List necessitated expenditure. Be sure to focus on the
unplanned or unexpected situations that caused upward
variance.
Mandatory: A list of key initiatives pursued, or
Savings drivers List circumstances that resulted in efficiencies or savings.
Include any deferred or canceled projects.

Also calculate and list the magnitude of costs incurred or savings realized
in hard financial terms so that the full impact of these events is truly
understood by your stakeholders.

“What is that ongoing cost?

If we brought in a new platform, what
does that do to our operating costs?”
– Kristen Thurber, IT Senior Director, Donaldson Company

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 See Tab 3 “Historical Analysis” in
your IT Cost Forecasting and

End with longer-term five-year trends Budgeting Workbook for these

outputs.

Mandatory: This is crucial for showing overall IT

IT actual expenditure expenditure patterns, particularly percentage changes up or
Graph
year over year down year to year, and what the drivers of those changes
were.
Mandatory: You need to set the stage for the proposed
IT actuals as a % of percentage of organizational revenue to come. The CFO
Graph
organizational revenue will be looking for consistency and an overall decreasing
pattern over time.
IT expenditure per FTE Optional: This can be a powerful metric as it’s simple and
Graph
year over year easily to understand.

The historical analysis you can do is

endless. You can generate many more cuts
of the data or go back even further – it’s
up to you.
Keep in mind that you won’t have a lot of
time during your presentation, so stick to
the high-level, high-impact graphs that
demonstrate overarching trends or
themes.

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 See Tab 3 “Historical Analysis” in
your IT Cost Forecasting and

Show different views of the details Budgeting Workbook for these

outputs.

Mandatory: Showing different types of

Budgeted vs. actuals workforce expenditure compared to
Graph
CFO expense view different types of vendor expenditure will
be important to the CFO.
Optional: Showing the expenditure of
Budgeted vs. actuals some IT services will clarify the true total
Graph
CIO services view costs of delivering and supporting these
services if misunderstandings exist.
Optional: A good way to show true
consumption levels and the relative IT
Budgeted vs. actuals haves and have-nots. Potentially political,
Graph
CXO business view so consider sharing one-on-one with
relevant business unit leaders instead of
doing a big public reveal.
Optional: Clarifies how much the
organization is investing in innovation or
growth versus keeping the lights on. Of
Budgeted vs. actual
Graph most interest to the CEO and possibly the
CEO innovation view
CFO, and good for starting conversations
about how well funding is aligned with
strategic directions.

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5.1a Select your retrospective content

30 minutes
1. Open your copy of the IT Cost Forecasting and Budgeting Workbook.
Input Output
2. From Tabs 1, “Historical Events & Projects, 3 “Historical Analysis”, and 6,
“Vendor Worksheet,” select the visual outputs (graphs and lists) you plan
to include in the retrospective section of your presentation. Consider the • Data and graphs from the • Selected content and visuals
following when determining what to include or exclude: completed IT Cost for the historical/
a) Fundamentals: Elements such as budgeted vs. actual, distribution Forecasting and Budgeting retrospective section of the
across expenditure types, and drivers of variance are mandatory. Workbook IT Budget Executive Presentat
ion
b) Key clarifications: What expectations need to be set or common
misunderstandings cleared up? Strategically insert visuals that
introduce and explain important concepts early. Materials Participants
c) Your time allowance. Plan for a maximum of seven minutes for every
half hour of total presentation time.
• Whiteboard/flip charts • Head of IT
3. Note what you plan to include in your presentation and set aside.
• IT Financial Lead
• Other IT Management

Download the IT Cost Forecasting and

Budgeting Workbook

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Next, transition from past expenditure to your proposal for the
future
Build a logical bridge between what happened in the past to what’s coming up next year using a comparative
approach and feature major highlights.
This transitional phase between the past and the future is important for the Target timeframe for presentation: 10 minutes
following reasons:
Key objectives: Transition, reveal proposed budget.
1. It illustrates any consistent patterns of IT expenditure that may exist and be relevant
in the near term. Potential content for section:

2. It sets the stage for explaining any deviations from historical patterns that you’re • Last year’s actuals vs. next year’s proposed.
about to propose. • Next year’s proposed budget in context of the past
3. It grounds proposed IT expenditure within the context of commitments made in five years’ year-over-year actuals.
previous years. • Last year’s actual expenditure type distribution vs.
Consider this the essential core of your presentation – this is the key message and next year’s proposed budget distribution.
what your audience came to hear. • Major projects to be started next year.

“The companies...that invest the most in IT aren’t necessarily the best performers.
On average, the most successful small and medium companies are more frugal when it comes to
company spend on IT (as long as they do it judiciously).”
– Source: Techvera, 2023

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 See Tab 8, “Proposed Budget
Analysis” in your IT Cost

Compare next year to last year Forecasting and Budgeting

Workbook for these outputs.

Last year’s total actuals vs. next Proposed budget in context: Year- Last year’s actuals vs. next year’s Last year’s expenditure per FTE
year’s total forecast over-year expenditure proposed by expenditure type vs. next year’s proposed

Graph Graph Graph Graph

Mandatory: This is the most Mandatory: Here, you will continue Recommended: A double-
Optional: This graph is particularly
important graph for connecting the the long-term view introduced in comparative breakdown of last year
useful in demonstrating the success
past with the future and is also the your historical data by adding on vs. next year by non-project OpEx,
of cost-control if the actual proposed
first meaningful view your audience next year’s projections to your non-project CapEx, and project
budget is higher that the previous
will have of your proposed budget existing five-year historical trend. CapEx illustrates where major
year but the IT cost per employee
for next year. The percentage change from last events, decisions, and changes are
has gone down.
year to next year will be the focus. having their impact.

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 See Tab 5, “Project CapEx
Forecast” in your IT Cost
Forecasting and Budgeting

Select business projects to profile Workbook for the data and

information to create these
outputs.

Mandatory: Focus on projects for which funding is

already committed and lean toward those that are
Major project profile Slide strategic or clearly support business goal attainment.
How many you profile is up to you, but three to five
is suggested.
Optional: List other projects on IT’s agenda to
communicate the scope of IT’s project-related
responsibilities and required expenditure to be
Minor project overview List
successful. Include in-progress projects that will be
completed next year and net-new projects on the
roster.

You can’t profile every project on the list, but it’s

important that your stakeholders see their priorities
clearly reflected in your budget; projects are the best
way to do this.
If you’ve successfully pre-sold your budget and
partnered with business-unit leaders to define IT
initiatives, your stakeholders should already be very
familiar with the project summaries you put in front of
them in your presentation.

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5.1b Select your transitional past-to-future content

30 minutes
1. Open your copy of the IT Cost Forecasting and Budgeting Workbook.
Input Output
2. From Tabs 5, “Project CapEx Forecast” and 7, “Proposed Budget
Analysis”, select the visual outputs (graphs and lists) you plan to include
in the transitional section of your presentation. Consider the following • Data and graphs from the • Selected content and visuals
when determining what to include or exclude: completed IT Cost for the past-to-future
a) Shift from CapEx to OpEx: If this has been a point of contention or Forecasting and Budgeting transitional section of the
confusion with your CFO in the past, or if your organization has Workbook IT Budget Executive Presentat
actively committed to greater cloud or outsourcing intensity, you’ll ion
want to show this year-to-year shift in expenditure type.
b) Strategic priorities: Profile major capital projects that reflect Materials Participants
stakeholder priorities. If your audience is already very familiar with
these projects, you may be able to skip detailed profiles and simply
list them. • Whiteboard/flip charts • Head of IT
c) Your time allowance. Plan for a maximum of 10 minutes for every • IT Financial Lead
half hour of total presentation time.
• Other IT Management
3. Note what you plan to include in your presentation and set aside.

Download the IT Cost Forecasting and

Budgeting Workbook

Info-Tech Research Group | 119

Finally, carefully select detailed drill-downs that add clarity
and depth to your proposed budget
The graphs you select here will be specific to your audience and any particular message you need to send.

This detailed phase of your presentation is important because it allows you to: Target timeframe for presentation: 7 minutes, but this
phase of the presentation may naturally segue into the
1. Highlight specific areas of IT expenditure that often get buried under generalities. final Q&A.
2. View your proposed budget from different perspectives that are most meaningful to Key objectives: Transparency, dialogue, buy-in.
your audience, such as traditional workforce vs. vendor allocations, expenditure by IT
service, business-unit consumption, and the allocation of funds to innovation and Potential content for section:
growth versus daily IT operations.
• Allocation across workforce vs. vendors
3. Get stakeholder attention. For example, laying out exactly how much money will be
spent next year in support of the Sales Department compared to other units will get the • Top vendors by expenditure
VP of Sales’ attention…and everyone else’s, for that matter. This kind of transparency • Allocation across on-premises vs. cloud
is invaluable for enabling meaningful conversations and thoughtful decision-making
about IT spend. • Allocation across core IT services
• Allocation across core business units
“A budget is a quantified version of • Allocation across business focus area
your service-level agreements.”
– Darin Stahl, Distinguished Analysis & Research Fellow,
Info-Tech Research Group,

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 See Tab 8, “Proposed Budget
Analysis” in your IT Cost

Start with the expense view details Forecasting and Budgeting

Workbook for these outputs.

Proposed budget: Mandatory: This is the traditional CFO’s view, so definitely

show it. The compelling twist here is showing it by expenditure
Workforce and vendors Graph
type, i.e. non-project OpEx, non-project CapEx, and project
by expenditure type CapEx.
Proposed budget: Cloud
Optional: If this is a point of contention or if an active
vs. on-premises vendor Graph
transition to cloud solutions is underway, then show it.
expenditure
Recommended: As with last year’s actuals, showing who the
Top vendors Graph top vendors are slated to be next year speaks volumes to
stakeholders about exactly where much of their money is going.

Next Year's Next Year's

If you have a diverse audience Vendor Proposed Total Proposed % of Total
Vendor Expenditure Vendor Expenditure
with diverse interests, be very
Advanced Acme $2,760,400.00 22.08%
selective – you don’t want to EverythingDesktop $1,260,540.00 10.09%
bore them with things they TotalCRM 5 $850,309.00 6.80%
don’t care about. Supertel $787,210.00 6.30%
LinePro Ltd. $702,128.00 5.62%
Superior SFA Ltd. $645,110.00 5.16%
HR123 $629,207.00 5.03%

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 See Tab 8, “Proposed Budget
Analysis” in your IT Cost

Offer choice details on the other views Forecasting and Budgeting

Workbook for these outputs.

Optional: Business unit leaders will be most interested in the

Proposed budget: IT application services. Proposed expenditure on security and data
services by expenditure Graph and BI services may be of particular interest given business
type priorities. Don’t linger on infrastructure spend unless charge-
back is in play.

Proposed budget: Optional: The purpose of this data is to show varying business
units where they stand in terms of consumption. It may be more
Business units by Graph
appropriate to show this graph in a one-on-one meeting or other
expenditure type context.
Proposed budget: Optional: The CEO will care most about this data. If they’re
Business focus by Graph not in the room, then consider bypassing it and discuss it
expenditure type separately with the CFO.

Inclusion of these graphs really depends on the

makeup of your audience. It’s a good decision
to show all of them to your CFO at some point
before the formal presentation. Consider
getting their advice on what to include and
exclude.

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5.1c Select next year’s expenditure sub-category details

30 minutes
1. Open your copy of the IT Cost Forecasting and Budgeting Workbook.
Input Output
2. From Tab 8, “Proposed Budget Analysis,” select the visual outputs
(graphs) you plan to include in the targeted expenditure sub-category
details section of your presentation. Consider the following when • Data and graphs from the • Selected content and visuals
determining what to include or exclude: completed IT Cost for the expenditure category
a) The presence of important fence-sitters. If there are key individuals Forecasting and Budgeting details section of the
who require more convincing, this is where you show them the reality Workbook IT Budget Executive Presentat
of what it costs to deliver their most business-critical IT services to ion
them.
b) The degree to which you’ve already gone over the numbers Materials Participants
previously with your audience. Again, if you’ve done your pre-selling,
this data may be old news and not worth going over again.
c) Your time allowance. Plan for a maximum of seven minutes for every • Whiteboard/flip charts • Head of IT
half hour of total presentation time.
• IT Financial Lead
3. Note what you plan to include in your presentation and set aside.
• Other IT Management

Download the IT Cost Forecasting and

Budgeting Workbook

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Finalize your line-up and put your selected content into a
presentation template
This step is about nailing down the horizontal logic of the story you want to tell.
Start by ordering and loading the visualizations of your budget data.
Download Info-Tech’s IT Budget Executive Presentation Regardless of the template you use, Info-Tech recommends the
Template following structure:
1. Summary: An overview of your decision-making assumptions, initial
targets given the business context, and the total proposed IT budget
amount.
2. Retrospective: An overview of previous years’ performance, with a
specific focus on last fiscal year.
3. Proposed budget overview: A high-level view of the proposed budget for
next fiscal year in the context of last year’s performance (i.e. the bridge
from past to future), including alternative scenarios considered and capital
projects on the roster.
4. Proposed budget details by category: Detailed views of the proposed
budget by expense type, IT service, business unit, and business focus
If you prefer, use your own internal presentation standard template category.
instead and Info-Tech’s template as a structural guide. 5. Next steps: Include question-and-answer and itemization of your next
actions through to submitting your final budget to the CFO.
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Draft the commentary that describes and highlights your
data’s key messages
This is where the rationales that you perfected earlier come into play.

Leave the details for the speaker’s Speak to everything that represents Identify causes and rationales.
notes. an increase or decrease of more
than 5% or that simply looks odd. This is why your numbers are as they
Remember that this is an executive are. However, if you’re not 100%
presentation. Use tags, pointers, and Being transparent is essential. Don’t sure what all driving factors are, don’t
very brief sentences in the body of hide anything. Acknowledge the make them up. Also, if the line
the presentation itself. Avoid walls of elephant in the room before your between cause and effect isn’t
text. You want your audience to be audience does to quickly stop straight, craft in advance a very
listening to your words, not reading a suspicious or doubtful thoughts. simple way of explaining it that you
slide. can offer whenever needed.

Be neutral and objective in your language. Re-emphasize your core themes to create connections.
You need to park strong feelings at the door. You’re If a single strategic project is driving cost increases across multiple
presenting rational facts and thoroughly vetted cost categories, point it out multiple times if needed to reinforce its
recommendations. The best defense is not to be importance. If an increase in one area is made possible by a significant
defensive, or even offensive for that matter. You don’t offset in another, say so to demonstrate your ongoing commitment to
need to argue, plead, or apologize – let your information efficiencies. If a single event from last year will continue having cost
speak for itself and allow the audience to arrive at their impacts on several IT services next year, spell this out.
own logical conclusions.

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5.2 Develop an executive presentation
Duration: 2 hours
1. Download the IT Budget Executive Presentation template. Input Output
2. Open your working version of the IT Cost Forecasting and Budgeting
Workbook and copy and paste your selected graphs and tables into the
• Tabular and graphical • Executive presentation
template. Note: Pasting as an image will preserve graph formatting. data outputs in the IT summarizing your
3. Incorporate observations and insights about your proposed budget and Cost Forecasting and proposed IT budget
other analysis into the template where indicated. Budgeting Workbook

4. Conduct an internal review of the final presentation to ensure it includes • Interpretive commentary
based on your analysis
all the elements you need and is error-free.
Note: Refer to your organization’s standards and norms for executive-level
presentations and either adapt the Info-Tech template accordingly or use your Materials Participants
own.

• IT Cost Forecasting and • CIO/IT Directors

Budgeting Workbook
• IT Financial Lead
• IT Budget Executive
• Other IT Management
Download the Presentation template
IT Budget Executive Presentation template.

Info-Tech Research Group | 126

Now it’s time to present your proposed IT budget for next
fiscal year
If you’ve done your homework and pre-sold your budget, the presentation itself should be a mere formality
with no surprises for anyone, including you.
Some final advice on presenting your proposed budget…

Partner up Use your champions Focus on the CFO Avoid judgment Solicit questions
If something big in your Let your advocates know The CFO is the most Let the numbers speak for You do want dialogue.
budget is an initiative in advance that you’d important stakeholder in themselves. Do point out However, keep your
that’s for a specific appreciate hearing their the room at the end of the highlights and areas of answers short and to the
business unit, let that voice during the day, even more than the interest but hold off on point. What does come up
business unit’s leader be presentation if you CEO in some cases. Their offering emotion-driven in discussion is a good
the face of it and have IT encounter any pushback, interests should take opinions. Let your indication of where you’ll
play the role of supporting or just to reinforce your priority if you’re pressed audience draw their own need to spend more time in
partner. main messages. for time. conclusions. the future.

The only other thing that can boost your chances is if you’re lucky enough to be scheduled to present between 10:00 and 11:00 on a Thursday
morning when people are most agreeable. Beyond that, apply the standard rules of good presentations to optimize your success.

Info-Tech Research Group | 127

Your presentation is done – now re-focus on budget
finalization and submission
This final stage tends to be very administrative. Follow the rules and get it done.
• Incorporate feedback: Follow up on comments from your first presentation and reflect them in your budget if
appropriate. This may include:
o Having follow-up conversations with stakeholders.
o Further clarifying the ROI projections or business benefits.
o Adjusting proposed expenditure amounts based on new information or a shift in priorities.
o Adding details or increasing granularity around specific issues of interest.
• Trim: Almost every business unit leader will need to make cuts to their initial budget proposal. After all, the
CFO has a finite pool of money to allocate. If all’s gone well, it may only be a few percent. Resurrect your less-
costly alternative scenario and selectively apply the options you laid out there. Focus on downsizing or
deferring capital projects if possible. If you must trim OpEx, remind the CFO about any service-level
adjustments that will need to happen to make the less expensive alternatives work.

• Re-present: It’s not unusual to have to present your budget one more time after you’ve made your adjustments. In some organizations, the first
presentation is to an internal executive group while the second one is to a governing board. The same rules apply to this second presentation as to your
first one.
• Submit: Slot your final budget into the list of accounts prescribed in the budget template provided by Finance. These templates often don’t align with
IT’s budget categories, but you’ll have to make do.

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Phase recap: Create and deliver
your presentation
You’ve reached the end of the budget creation and approval
process. Now you can refocus on using your budget as a living
governance tool.
“Everyone understands that
This phase focused on developing your final proposed budget presentation for delivery to
your various stakeholders. Here, you: there’s never enough money.
• Planned your final content. You selected the data and visuals to include and highlight. The challenge is prioritizing the
• Built your presentation. You pulled everything together into a PowerPoint template and right work and funding it.”
crafted commentary to tell a cohesive IT budget story.
– Trisha Goya, Director, IT Governance &
• Presented to stakeholders. You delivered your proposed IT budget and solicited their Administration, Hawaii Medical Service Association
comments and feedback.
• Made final adjustments and submitted your budget. You applied final tweaks,
deconstructed your budget to fit Finance’s template, and submitted it for entry into
Finance’s system.

Info-Tech Research Group | 129

Next Steps This final section will provide you
with:

• An overall summary of
accomplishment.

• Recommended next steps.

“Keep that conversation going • A list of contributors to this research.
throughout the year so that at
• Some related Info-Tech resources.
budgeting time no one is surprised…
Make sure that you’re telling your
story all year long and keep track of
that story.”
– Angela Hintz, VP of PMO & Integrated Services,
Blue Cross and Blue Shield of Louisiana

Create a Transparent and

Defensible IT Budget

Info-Tech Research Group | 130

Summary of If you would like additional
Accomplishment support, have our analysts
guide you through an Info-
You’ve successfully created a transparent IT budget and Tech full-service engagement
gotten it approved. or Guided Implementation.

By following the phases and steps in this blueprint, you have:

Contact your account representative for
1. Learned more about what an IT budget does and what it means to your key stakeholders.
more information.
2. Assembled your budgeting team and critical data needed for forecasting and budgeting, as well
as set expenditure goals for next fiscal year, and metrics for improving the budgeting process 1-888-670-8889
overall.
3. Forecasted your project and non-project CapEx and OpEx for next fiscal year and beyond.
4. Fine-tuned your proposed expenditure rationales.
5. Crafted and delivered an executive presentation and got your budget approved.

What’s next?
Use your approved budget as an ongoing IT financial management governance tool and track your
budget process improvement metrics.

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Research Contributors and Experts
Monica Braun Carol Carr
Research Director, ITFM Practice Technical Counselor (Finance)
Info-Tech Research Group Info-Tech Research Group

Larry Clark Duane Cooney

Executive Counselor Executive Counselor
Info-Tech Research Group Info-Tech Research Group

Lynn Fyhrlund Trisha Goya

Former Chief Information Officer Director, IT Governance & Administration,
Milwaukee County Hawaii Medical Service Association

Angela Hintz Rick Hopfer

VP of PMO & Integrated Services Chief Information Officer
Blue Cross and Blue Shield of Louisiana Hawaii Medical Service Association

Theresa Hughes Dave Kish

Executive Counselor Practice Lead, IT Financial Management Practice
Info-Tech Research Group Info-Tech Research Group

Info-Tech Research Group | 132

Research Contributors and Experts
Matt Johnson Titus Moore
IT Director Governance and Business Solutions Executive Counselor
Milwaukee County Info-Tech Research Group

Angie Reynolds Mark Roman

Principal Research Director, IT Financial Management Practice Managing Partner, Executive Services
Info-Tech Research Group Info-Tech Research Group

Darin Stahl Miguel Suarez

Distinguished Analyst & Research Fellow Head of Technology
Info-Tech Research Group Seguros Monterrey New York Life

Kristen Thurber Anonymous Contributor

IT Senior Director Head of IT
Donaldson Company Manufacturing

Info-Tech Research Group | 133

Related Info- Achieve IT Spend & Staffing Transparency
Tech • IT spend has increased in volume and complexity, but how IT spend decisions are
made has not kept pace.

Research & • Lay a foundation for meaningful conversations and informed decision making around
IT spend by transparently mapping exactly where IT funds are really going.

Services
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• Is a do-it-yourself approach to achieving spend transparency too onerous? Let Info-
Tech do the heavy lifting for you.
• Using Info-Tech’s ITFM Cost Model, our analysts will map your IT expenditure to
four different stakeholder views – CFO Expense View, CIO Service View, CXO
Business View, and CEO Innovation View – so that you clearly show where
expenditure is going in terms that stakeholders can relate to and better demonstrate
IT’s value to the business.
• Get a full report that shows how your spend is allocated plus benchmarks that
compare your results to those of your industry peers.

Build Your IT Cost Optimization Roadmap

• Cost optimization is usually thought about in terms of cuts, when it’s really about
optimizing IT’s cost-to-value ratio.
• Develop a cost-optimization strategy based on your organization’s circumstances and
timeline focused on four key areas of IT expenditure: assets, vendors, projects, and
workforce.
Info-Tech Research Group | 134
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Butcher, Daniel. “CFO to CFO: Budgeting to Fund Strategic Plans.” Strategic Finance Accessed 3 Mar. 2023.
Magazine/Institute of Management Accountants, 1 Dec. 2021. Accessed 17 Feb. 2023
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