Fine-tuning an IT budget to weather the challenges of tomorrow is a tricky art. Learn insights on how to plan for and address the hot topics in 2021.
Whether you work in technology management, in the trenches as a subject matter expert (SME), or individual contributor, it's important to have a good level of familiarity with management practices, especially your IT budget. Focusing on and understanding your budget can help you assess your project priorities and establish proven methodologies to demonstrate return on investment (ROI) to justify expenditures on software, hardware, services, and personnel.
SEE: Tech budgets 2021: A CXO's Guide (free PDF) (TechRepublic)
Even though I'm a system administrator, about ten years ago I read the fantastic IT Manager's Handbook: The Business Edition by Bill Holtsnider and Brian D. Jaffe. This book really gave me a lot of good insights which, coupled with a solid level of transparency into my company's budget thanks to forward-thinking management, has helped shape my career even though I'm a not a technology leader. Knowing where the spending lies helps me focus on the priorities and vice versa, thanks to employee-solicited feedback.
I discussed the topic of IT budgets and what's unique about them in 2021 with Chris Rechtsteiner, vice president at ServerCentral Turing Group, a cloud consultancy.
Scott Matteson: How much scrutiny are 2021 budgets receiving from the C-suite?
Chris Rechtsteiner: More scrutiny than ever. The need to effectively execute net new digital transformation projects—or optimize existing projects—has never been more critical to the short or long-term success of a business. Recognizing opportunities and challenges as soon as they exist and effectively pursuing them when appropriate will make or break many organizations in the coming year.
Scott Matteson: Is there anything new about the scrutiny that pertains to the pandemic and 2020?
Chris Rechtsteiner: Yes! Digital-first experiences are no longer nice to have. They are mandatory for every business because it is one of the only guaranteed way they can operate at this time. Projects that are not aligned with creating or improving these experiences will not receive investment or will receive significantly diminished investment. The tolerance for risk will be less. While everyone recognizes digital first is a fast-iteration game, the risk tolerance will still be lower than ever as the criticality of success has never been higher. Mistakes will need to be made and improved on faster than before so the impact of them will be as nominal as possible.
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IT teams should ask themselves these questions to ensure their 2021 budget is well spent and to ensure they can prove ROI on their tech investments:
- Where do we need to spend to keep the business running?
- What costs only supported the old (pre-COVID) way of our business (and are now on the chopping block)?
- How can we leverage available data to find these answers?
Scott Matteson: What particular challenges do these new developments entail and what are the recommended approaches or advice?
Chris Rechtsteiner: Planning. A common thread you've seen and heard us discuss and promote is planning. Know what you want to accomplish. Define your success criteria and desired outcomes in terms of the business, not just technology. Be sure these outcomes are well communicated across the entire organization, not just within the project teams. This enables intelligent decisions to be made and ownership to occur, throughout the company.
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Next, define your risk profile—really define it—and communicate it. What is acceptable today and what isn't? Why? Risk profiles have changed dramatically for most organizations in the past 12 months as previously unacceptable risks are now commonplace.
Who thought a 100% remote workforce was an acceptable risk last February?
Who thought a 100% remote workforce working without always-on VPN connectivity would be acceptable and encouraged?
Who knew consumer and business acceptance of contactless services would happen overnight?
Scott Matteson: You mentioned that looking at where businesses need to spend money to stay running is a priority. What have been (or likely will be) the likely answers?
Chris Rechtsteiner: This ties directly to the previous question: What are your success criteria or desired outcomes? What are your plans to achieve them? When you have specific outcomes to achieve, the investment will follow their pursuit. The luxury of investing in projects for the sake of experimentation may not be feasible for all organizations right now as the efforts associated with achieving the core outcomes (e.g. digital transformation, contactless products and services, utilization of third-party distribution networks) are likely heavier than in previous years.
Scott Matteson: What costs only supported the pre-COVID way?
Chris Rechtsteiner: This, too, is directly aligned with priorities. If you have traditionally invested in something (applications, infrastructure, etc.) that is no longer relevant—or as critical to your success—don't invest or lower your investment. Determine the minimum viable service, the minimum amount of investment you need in those areas to maintain the operation, and apply it. Enable the rest of your investments to pursue more important outcomes.
These are difficult questions to ask and answer because they are tied to years of planning and operation. However, you need to ask them and be prepared to recognize that lowering or removing investment in one or more areas is likely going to be the right path for 2021 and beyond. The change happening is that significant. Attachment to the past way of doing something isn't going to positively impact the future.
Scott Matteson: How can we leverage available data to find these answers?
Chris Rechtsteiner: More than just the data, look to the teams involved. Open Zoom for candid conversations about what is critical and what isn't. We find that when asked about the criticality of an application or environment the immediate reaction is, "It's absolutely critical." However, when we dive deeper in asking how the application or environment impacts other teams, who uses it, etc., the answers do not support the knee-jerk "critical" answer. When teams are given the opportunity to openly and candidly discuss what is and what isn't working, they will be able to clearly identify opportunities for shifting investment, EoLing [End of Life] applications or environment and other status quo projects that are no longer needed.
Scott Matteson: What other ways can IT departments prove the ROI on tech investments?
Chris Rechtsteiner: The best way to prove ROI is to have defined business outcomes. This sounds simple but it is always overlooked as technology investments become singularly focused on lowering costs. When you define technology investments purely in terms of "cost savings" you are missing their opportunity to contribute to the top line of the business. Set objectives for the investments to be revenue-generating or to directly support top-line growth, not just "in the middle" reductions to improve the bottom line.
Scott Matteson: Do you have any other tips for how to weather 2021 budgets?
Chris Rechtsteiner: Be flexible. 2020 has shown us that even the best laid plans can be tossed aside without warning. Stay focused on the business outcomes—the true benefits to the top and bottom lines of the business. This sounds simple, basic even, but it is really the truth. The most important thing we can all do is recognize our best plans will be challenged and be ready to intelligently address those changes when they occur, and they are going to continue to occur.
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