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Best IT Budget Categories

By JAB42 ·
I want to raise the quality of budgeting that we do here in our shop. I'm looking for a good, comprehensive list of budget categories that people use. What major/minor categories do you use in your IT budgets?

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KISS key: Keep it simple and stupid

The more categories you create, the more links you will have to create between them.
How I see it, it is not about an accurate budget, it is about a dynamic/solid forecast what helpd to drive IT expenses.

The minimum categories I would suggest are:
-Full employee cost
-Contractors (it has less hidding cost and helps to take prompt decissions by keeping this one outside F.Em.)
-Depreciation or HW cost (buy vs. lease)
-Services (my recommendation is to create a second one for high cost services, like WAN

Other to add depends on where you plan to save in case of being over... I would suggest to drill inside employee cost:
-Traveling
-Training (this one will help on HR conversations).

Hope it helps.
Best regards,
JM$

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2 Categories

by dkerta In reply to KISS key: Keep it simple ...

There are only 2 categories
a. CAPEX - Capital Expenditure
b. OPEX - Operating expenditure

Easy to manage, bundle IT project/initiative in one CAPEX.

Define a flexible definition of CAPEX and agreed with Management. Value and mobility might be samples of parameter to categorize them as CAPEX.

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2 Categories

by dkerta In reply to KISS key: Keep it simple ...

There are only 2 category
a. CAPEX - Capital Expenditure
b. OPEX - Operating expenditure

Easy to manage, bundle IT project/initiative in one CAPEX.

Define a flexible definition of CAPEX and agreed with Management. Value and mobility might be samples of parameter to categorize them as CAPEX.

Out of that, put them as OPEX.

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Suggestion Budget Categories

by coppens_peter In reply to Best IT Budget Categories

Mainly, I split the budget in two categories: operational expenses and investments. Below you'll find detailed overview. Please keep in mind this is just an example and your case will be different.

1. Operational expenses
1.1 Hardware
list of smaller hardware purchases (e.g. mouses, consumables, etc..)
1.2 Software
list of smaller hardware purchases
1.3 Consultancy/services
1.3.1 Services contract
list of services with a fixed contract and a price
1.3.2 Services incident
list of services with a fixed contract and no fixed price (provisions)
1.4 Maintenance
1.4.1 Maintenance hardware
1.4.2 Maintenance software
1.5 Telecom
1.5.1 Telecom WAN
1.5.2 Telecom Internet
1.5.3 Telecom voice
1.6 Personnel
1.7 Output costs
list of printers, toners, etc...

2. Investments
2.1 Hardware / Infrastructure
List of major projects like PC/server replacements, network & cabling, security, etc...
2.2 Software / Consultancy
List of major projects like office automation, ERP-projects, data-warehousing, etc...

Of course, check this with your finance department, before use.

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Categories

by lew_tech In reply to Best IT Budget Categories

I agree with the breakout of categories listed in the other postings.

I strongly suggest that you separate your long-term hardware purchases from your short-term consumables. By doing so, you will be able to focus on ways to dramatically cut components of your long-term hardware purchases.

One way to cut long-term hardware purchases is to phase out the PCs in your organization. While a few users may require PCs or even Macs to order to perform their duties, the large majority of PC users can be switched to diskless thin clients.

Diskless thin clients (totally stateless desktop nodes that operate completely off of central servers) can last 10-15 years. By switching to diskless thin clients, you can also eliminate all of the desktop administration that PCs require. This may help you cut your employee costs as well.

The effect on budgeting of breaking the PC replacement cycle is rather dramatic. The effect on the personnel costs that were required to support PCs is also dramatic.

You can also cut other costs that are associated with PCs. One is the cost to secure or lockdown each unit with anti-virus software. It is much more cost effective to buy a more robust commercial anti-virus package for your server than to purchase individual software for each PC.

If you have a category for electrical costs, you can positively effect that category, too. A typical PC uses 175-250 watts. A typical diskless thin client uses 5 watts. More like using a night light rather than a flood light.

Just something to think about while you are thinking about your budget categories.

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Template

by Scott.Rolf In reply to Categories

Here is a quick and dirty template I created a few years back. You'll have to customize it for your site, but it's at least a starting point.


0001 Offsite Storage
0001 001 Monthly Storage Fees
0002 Software
0002 001 Miscellaneous
0002 002 Microsoft
0002 003 Adobe
0002 004 RedHat
0002 005 Winzip
0002 006 Roxio
0002 007 Symantec Antivirus
0002 008 Symantec Backup Exec
0002 009 Cisco
0002 010 Quest
0002 011 Autodesk
0003 Hardware Maintenance/Repairs
0003 001 Miscellaneous
0003 002 Servers
0003 003 Desktops
0003 004 Laptops
0003 005 Scanners
0003 006 Network Gear
0003 007 Wiring
0003 009 Tools
0003 010 Printers
0003 011 Copiers
0004 Services
0004 001 Miscellaneous
0004 002 Email Antivirus/AntiSpam Services
0004 003 efax services
0005 Small Computer Equipment Purchases
0005 001 Miscellaneous
0005 002 Servers
0005 003 Desktops
0005 004 Laptops
0005 005 Monitors
0005 006 Scanners
0005 007 Network Gear
0005 008 Wiring
0005 009 Routers & Switches
0005 010 Tools
0006 Printer Expenses
0006 001 Toner & Supplies
0006 002 Vendor Maintenance Contracts
0006 003 Parts
0007 Computer Room Expenses
0007 001 UPS
0007 002 Fire Suppression
0007 003 HVAC
0007 004 Electrical
0008 Computer Supplies
0008 001 Miscellaneous
0008 002 Removable Media
0008 003 Backup Tapes
0009 Telephone Service Charges
0009 001 Local Service
0009 002 Long Distance
0009 003 Conference Calling
0009 004 Installation Charges
0010 Data Services Charges
0010 001 DSL
0010 002 T1
0010 003 Fiber
0011 Telephone System Maintenance
0011 001 Repair
0011 002 Preventitive Maintenance
0012 Telecommunications Miscellaneous
0012 001 Miscellaneous
0012 002 Handsets
0012 003 Headsets
0012 004 Wiring
0013 Information Technology Consultants
0013 001 ABC
0013 002 Other
0014 Depreciation
0014 001 Software
0014 002 Hardware

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Depreciation: deal with or not?

by JAB42 In reply to Best IT Budget Categories

Thanks for the ideas everyone. I've noticed here and in other places that some IT budgets deal with depreciation and some don't. While I have some ideas, I would be interested in *why* others do or don't deal with depreciation in their budgets.

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Depreciation is a cost

by coppens_peter In reply to Depreciation: deal with o ...

Since depreciation is about costs made in the past (and can not be influenced anymore) this is from an operational point of view out of scope. But formally this is a cost, and a cost should be included in the budget!

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Depreciation is a period cost & reserve for replacement

by nettarget In reply to Depreciation is a cost

depreciation is part of matching revenues or activities with a given period, usually a calendar year. Companies acquire assets to generate/facilatate goods and services for gain (revenue). part of the matching principle. the asset that is being depreciated has a value for accounting/finance purposes eg bank loans. also depreciation is a reserve for replacement expense so offset (deducted) against revenue for tax purposes.

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Bean Counter function

by tundraroamer In reply to Depreciation: deal with o ...

Depreciation is a bean counter function that IT should not have to deal with, at least in smaller shops anyway. I think depreciation time periods are longer than what good practice is. Mainly servers should be replaced every 5 years. Deprecation is spelled "replacement expense" in the practical world of system maintenance.
My focus has always been on operating/maintenance and future replacement.
4 years ago, my replacement budget was ignored by the bean counters. This year when that hardware failed, the replacement cost was $200K using 3rd party assistance to expedite. Funny how when it is broke, money suddenly becomes available but not that much. I have been able to do about 1/3rd to 1/2 or so of the required hardware/software replacements/upgrades for about $25K in house.
The bean counters won the first round but in the end, the failure cost everyone in downtime.
BTW, I also support the use of thin clients. I replaced about a dozen for $149 each this year. You would be hard pressed to notice the difference between them and a PC in nearly all applications even over large WAN.

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