Presented at InnoTech Austin on October 20, 2011. For details on InnoTech, visit www.innotechconferences.com

1. 8627 North Mopac, Suite 110
Austin, TX 78759
(512)249-6080x318 office
(512)567-6758 cell
www.gcsaustin.com
Create an IT Budget Your CFO Will Love!
Introduction
As a consultant I’ve worked with more than a thousand organizations in need of IT solutions. The vast
majority budget and plan technology expenditures poorly. This presentation will highly the failures and
successes I’ve encountered throughout the years.
 Average IT Budget Distribution for Orgs $25M - $100M:
o Salaries: 53%
o Consulting: 3%
o Training: 1.5%
o Licensing and Maint: 10%
o Hardware: 5%
o Services: 5%
o Telecom: 10%
o Other: 12.5%
What Does a CFO Love?
Most CFOs live in a very black and white world of profit or loss. Expenditures which demonstrate
increased profit or decreased risk are easy to approve. In every modern organization there is intense
competition for these expenditures. A CFO must believe that IT’s proposals are more profitable or
address key risk better than other departmental requests.
 Predictability
 Value
 Business Focus
Challenges for IT Executives
Few IT executives rank budgeting among their strengths. All would agree that good budgeting is critical
to long term success. The skills required for effective budgeting are not prerequisites for success in
strictly technical positions.
 Minimal Financial Expertise

2. 8627 North Mopac, Suite 110
Austin, TX 78759
(512)249-6080x318 office
(512)567-6758 cell
www.gcsaustin.com
 “Selling Uphill” – Using FUD - Fear, Uncertainty, and Doubt
 Unlimited Demands from the Business/Organization
o At Zero Cost Demand is Infinite
o Methods Must be Implemented to Restrict Access to IT
o Expectations Must be Managed Carefully
 Surprise Requirements for Non-IT technology spending
Basic Financial Elements of a Budget
At GCS we essentially run a large IT department as a business. Our budgeting and planning rules are
easily adapted to internal IT departments. At GCS, like with all businesses, we work to keep our
overhead low while focusing on controlling direct costs – costs that are directly tied to income. In most
IT departments direct costs are operating expenses. Overhead costs are capital expenditures.
 Operating vs Capital Expenditures
 Operating Expenses
o Highly Flexible
o Recurring
o Similar to Direct costs / varies with volume of business
 Capital Expenditures
o Depreciated over 3 – 5 years (IRS = 5 Years)
o Similar to Overhead costs
o Decreases in volume of business do not affect costs
o Increases in volume of business require large investments
Roadmapping
Day-to-day and year-to-year purchasing decisions require long range guidance. Information Technology
undergoes rapid strategic changes that must be considered in the context of each organization’s specific
needs.
 Strategy to Guide Spending
 18 – 24 Month Focus
 Guidelines to Assist In Individual Purchasing Decisions.
 Incorporate IT Strategy Shifts such Server and Desktop Virtualization, Cloud Computing,
 Include Proof of Concept $ in Every Budget
 Centralized Storage Example

3. 8627 North Mopac, Suite 110
Austin, TX 78759
(512)249-6080x318 office
(512)567-6758 cell
www.gcsaustin.com
Cloud Computing – Align Income and Expenses at a Huge Price
The impact of cloud computing is entirely on the balance sheet today. This section will examine the
common misperception that cloud computing reduces cost. We will examine the cost flexibility of these
solutions and quantify that value.
 Flexible
 Expensive
 Security Concerns
Predictability
Predictability is achieved with effective capacity management, accurate cost estimates, and a limited
scope. Surprises of any sort sour the relationship between IT and the business.
 Capacity Management
 Service Level Agreement
 Supported Technologies
 Project Management Capabilities
 Refresh/Upgrade Cycles
Value
Most CFOs, like most humans, are penny pinchers. They write big checks more easily when they believe
they are getting a great deal. RFP processes have been relied on for decades but frequently emphasize
cost over value.
 Competitive Bidding / RFP Processes
 Zero Based Budgeting
o Starting from scratch in each category
 Comparison to Peers – Baselines
o Average US company spends $2k - $8k per user per year on IT
o By Industry 2% - 4% of Gross Revenue on IT
o 80% Maintenance / 20% Development or New Technology
Business Focus
The vast majority of IT budgets emphasize IT focused projects. Version upgrades, management software,
or architecture changes are but a few examples. The CFO hears far more about IT from the business

4. 8627 North Mopac, Suite 110
Austin, TX 78759
(512)249-6080x318 office
(512)567-6758 cell
www.gcsaustin.com
than he hears from IT about ANYTHING. Address the concerns and requests he hears most often for long
term success.
 New Technology Rollouts
 Minimize IT Department “pet” Projects
o Management Improvements and Maintenance Projects
 Role of a Steering or Advisory Committee
 Consumerization