How to Write an IT Budget 

To some, budget-writing is an excruciating, tedious process. Perhaps these people are missing the beauty of budget writing: a well-written budget will passively boost your influence and promote your value all year round. 

In any case, here’s some tips to streamline the business-technology budget writing process, whether you want to knock it out of the park, or just get it over with.  

Step 1: Break Down Expenditures 

Granularity is important when breaking down IT budget expenses. For convenience, the following list contains a common and comprehensive organizational structure for IT budget line-item

Personnel 

  • Salaries/benefits 
  • Training  
  • Perks 
  • Remote workers 
  • Productivity Software  
  • CRM Licensing fees 
  • Project management software 
  • Communications software 

Hardware 

  • Desktop 
  • Laptops 
  • Tablets and mobile 
  • Power and climate 
  • External storage 
  • Printers 
  • Telephony 
  • Servers 

Disaster Recovery 

  • Data backup  
  • Hot site/cold site costs 
  • Auditing fees 
  • Software 
  • Contractors 

Telecommunications 

  • Internet 
  • Phone 

Infrastructure 

  • Data Center 
  • Network Support 
  • Server OS

Cybersecurity  

  • Specialist training 
  • Contractors 
  • Network awareness 
  • Employee education 
  • Perimeter solutions 

National trends indicate shifting priorities on the aforementioned categories. While changes vary based on industry and company size, a 2018 survey by IT research firm Spiceworks found the following:  

  • Hardware takes up most of the IT budget, followed by software, which combined account for more than half of spending. 

  • Hosted and cloud-based services take up between 20-25 percent of spend at companies of all sizes. 

  • Cybersecurity is that fastest growing categories, especially in managed services. 

  

Step 2: Plan for Innovation 

This next step is for the go-getters After all, passion for experimentation and new technology is what draws many successful IT pros to the field in the first place.  

However, risk aversion in other areas of the company can make it hard to drive change, and business executives can be hard sells on new tech initiatives. For this reason, it’s important to have a budget with a built-in innovation mechanism. Risk, failure, and iteration are all easier for stakeholders to accept when planned for.   

To ensure business evolution, ex-Google CEO Eric Schmidt introduced a methodology called the 70:20:10 innovation rule at his company. Schmidt’s idea was that Googlers should spend 70 percent of their time on primary day-to-day functions, 20 percent of their time on forward-looking growth projects, and ten percent of their time on moonshot initiatives.   

 The 70:20:10 split has since been adopted by leading IT thought leaders such as Gartner, who has named the innovation-focused budgeting strategy the IT  Run/Grow/Transform the Business Split. It breaks down as follows: 

  • Spend 70 percent for core business operations (meeting payroll, keeping the lights on), 

  • 20 percent spending for growth initiatives, and 

  • 10 percent for transformational projects. 

Step 3: Segment the Budget 

There are many ways to carve a budget in addition to the 70:20:10 split and other categories described previously. More segments and data labels increase budget complexity and are often an improvement because they speak to the numerous stakeholder concerns within the company.  

For example, many IT budgets label line-items by priority. Adding high, medium, and low designations to cost categories help budget reviewers understand why some items are allotted more than others, without giving the impression that some initiatives have just been erased. 

Another common practice is which costs are recurring, and what are one-time expenses. This helps to explain large variances, such as for hardware refreshing, and will help accounting with their projections.  

Finally, it’s often a good idea to help the finance team by indicating which costs are capital or operating expenditures. Many finance professionals prefer budgets that are lighter on capital costs, since capital depreciates, and because IT hardware refreshes are so costly.  

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There's both an art and science to IT budget writing. But don't underestimate the power of the budget to extend your influence.

Use your IT budget to grow the company, champion projects, and demonstrate business acumen. That way, the IT budget will work passively for you all year round. 

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