Your Challenge: IT cost pressure is fueled by negative sentiment; IT can be perceived as a high cost that does not deliver value. Budgetary approval is difficult because finance executives have a limited understanding of IT and use a different vocabulary. Detailed budgets must be constructed in a way that is transparent, but too much detail results in complexity that is confusing. Our Advice: Critical Insight: An effective IT budget tells the story of how IT is going to deliver value to the business. Make the business your partner to understand their future needs. Know how much money you’ll need and the value you’re going to deliver. Communication matters; present clearly and credibly. Help the organization make the right decisions by explaining the implications of its choices. Impact and Result Knowing the initiatives business units will propose allows you to get a head start on forecasting IT costs. Presell ideas. Quick face-to-face chats about how a new initiative could benefit the organization can go a long way. Do not pad key innovation project budgets; building the case for approval is difficult enough as is. Forecasting operating costs requires an accurate view of historical costs and an understanding of how business changes will affect IT costs. Anticipate the questions that will be asked; discretionary projects are often criticized and challenged. Think about areas that people will focus on, do research, and be ready to respond intelligently. An IT department can’t squeeze dollars out of rocks. Tie cost reductions to service reductions and deferred projects.

1. Info-Tech Research Group 1Info-Tech Research Group 1
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2. Info-Tech Research Group 2Info-Tech Research Group 2
For any organizational function that is structured in a hub-and-spoke
fashion (a central unit delivering services to other units) without a
direct connection to revenue, presenting the value of investments will
always be a challenge.
Cost information alone is not enough context for a business audience
to understand the value of IT investment. The challenge becomes
about how exactly IT should communicate the benefit of investment to
fulfill the value equation.
The best recourse is to align investments with confirmed
organizational priorities, goals, imperatives, and essential outcomes.
Your IT budget and presentation must include this.
David Glazer
Research Manager, CIO Practice
Info-Tech Research Group
Value = Benefit – Cost
ANALYST PERSPECTIVE

3. Info-Tech Research Group 3Info-Tech Research Group 3
Resolution
Situation
Complication
Executive summary
• Budgetary approval can make or break your year. IT is often viewed as a
cost center and getting enough funding can be challenging. A bad
budget proposal can be subjected to fiscal attack preventing you from
meeting the needs of the business. A good budget proposal can get you
the funding you need to deliver extraordinary value.
• IT cost pressure is fueled by negative sentiment; IT can be perceived as
a high cost that does not deliver value. Budgetary approval is difficult
because finance executives have a limited understanding of IT and use
a different vocabulary. Detailed budgets must be constructed in a way
that is transparent, but too much detail results in complexity that is
confusing.
• As traditional IT capital expenditures have been replaced by cloud
services and other “as-a-service” models, the line between capital and
operational budgets has blurred. A lack of clear definitions confuses
finance and undermines IT’s budgetary goals.
• Our approach speeds up the process of information gathering with customizable forms, templates, and best practices.
• Our program focuses on working collaboratively with the business in order to identify, categorize, and prioritize costs. Help
the business achieve its strategy by communicating the value of IT investments and accurately forecasting costs and
benefits.
Your audience won’t understand
the value of IT if you can’t
communicate the benefit(s).
• An IT budgeting process must contain
adequate measures to capture and
communicate the benefit of IT
investments.
• This begins with the collection of data
and ends with effectively presenting the
benefits IT investments will have for the
business.

4. Info-Tech Research Group 4Info-Tech Research Group 4
This Research is Designed For: This Research Will Help You:
This Research Will Assist: This Research Will Help You:
This Research Is Designed For: This Research Will Help You:
This Research Will Also Assist: This Research Will Help Them:
Our understanding of the problem
Chief Information Officer (CIO) Determine how better budgeting can help your
IT department and organization.
Clarify budgeting goals and objectives.
Develop an accurate forecasting methodology.
Develop a better approach to collecting and
communicating the benefits of IT investments.
Improve chances of getting the funding you
need through enhanced presentation and
negotiation.
CIO Direct Reports Clarify budgeting goals and objectives.
Develop a forecasting methodology for their
specific silos.
Help strengthen the budget via peer review
and collaboration.
Develop budgeting skills that will improve your
IT department’s IT financial management
capabilities.

5. Info-Tech Research Group 5Info-Tech Research Group 5
It’s not just you; everyone feels the pain of IT budgeting
of CFOs said their organizations’ budgeting
processes needed improvement.37%
of CFOs claim their staff was too busy with daily
tasks to make the changes needed to keep their
budgets up to date.
62%
of CFOs describe their current financial planning
and analysis system as effective.40%
Source: Grant Thornton, 2015

6. Info-Tech Research Group 6Info-Tech Research Group 6
IT’s success depends on delivering benefits
45%
30%
25%
Resource Optimization
Benefits Delivery
Risk Mitigation
“Which business
objectives should
IT be able to
support best?”
Historically, IT
departments have
been mandated to
optimize
resources and
mitigate risks.
Today, IT success
means delivering
benefits by
generating
revenue and
creating value for
stakeholders.
Source: Info-Tech Research Group

7. Info-Tech Research Group 7Info-Tech Research Group 7
Many CIOs misestimate the size of their next IT budget
CIOs Accurately
Estimated
CIOs
Overestimated
CIOs
Underestimated
43% of CIOs
overestimate the
size of their next
budget.
23% of CIOs are too
conservative and
underestimate their
future IT budget.
Increase
16–30%
Increase
> 30%
Increase
6–15%
Increase
1–5%
Decrease
1–5%
Increase
16–30%
Increase
6–15%
Increase
1–5%
Decrease
1–5%
Decrease
6–15%
CIO Expectation CEO Expectation
Source: Info-Tech Research Group

8. Info-Tech Research Group 8Info-Tech Research Group 8
Organizational priorities should drive IT priorities; there’s
misalignment on shareholder value
Based on responses from 63 CEOs,
their most important goals are…
1st Maximizing stakeholder value
(CIO: 4th).
2nd Improving operational efficiency
(CIO: 1st).
3rd Improving customer experience
(CIO: 3rd).
CEOs and CIOs agree that significant
improvements are required for…
●
Metrics measuring success of IT
projects.
● Business stakeholder satisfaction.
●
An IT strategy clearly defined, published,
and aligned with business goals.

9. Info-Tech Research Group 9Info-Tech Research Group 9
Common challenges with budgeting
The funding I get just isn’t enough to deliver
everything that business units demand while
maintaining service levels. Important IT
improvement projects get put on the back
burner because funds aren’t available.
Symptom Cause
The projects led by business units demand IT support,
consuming a large proportion of the IT budget. Limited
funding is provided for IT improvement. Downward
budgetary pressure results in service-level reduction,
layoffs, and outsourcing.
The great irony is that the budgeting process
itself is expensive! It takes a lot of people and a
lot of time to get it done, and then the back-
and-forth rework is endless.
There is often inadequate time given to the budget
creation process. Often, the business unit planning
necessary to forecast IT costs does not conclude until
shortly before the IT budget is due. Furthermore, IT
budgets are rarely approved on the first submission,
leading to more work and budget reductions.
Defending my budget is impossible because IT
cost forecasting is complicated by thousands of
variables. If you drill down on any number
deep enough, you’ll find assumptions that are
tough to defend. And we just don’t have the
data to make the budget accurate.
Forecasting cost is complicated and there are a number
of factors that cause inaccuracy. Data provided by
finance frequently includes obsolete and unnecessary
line items, leading to over-budgeting. Furthermore, the
deferral of planned business projects causes budget
and cost variance, decreasing the credibility of the IT
budget process.

10. Info-Tech Research Group 10Info-Tech Research Group 10
Do’s and don’ts of budgeting
• Wait for business planning to conclude
before budgeting, resulting in a time crunch.
• Present budget for the first time at budget
meeting.
• Use fast and simple incremental budgeting
that does not account for changing wages
or vendor prices.
• Maintain all non-discretionary expenses
and cut most innovation projects.
• Present budget proposal using the bare
facts and technical jargon.
• Have preliminary talks with business units
to understand their plans for the fiscal year.
• Presell ideas, making business units into
advocates for the budget.
• Start budgeting early, with a sound
forecasting methodology.
• Prioritize discretionary projects.
• Reduce budget through improved
efficiency, application rationalization, and
outsourcing.
• Present budget proposal using a visual and
engaging presentation that shows value for
money.
Do’s Don’ts

11. Info-Tech Research Group 11Info-Tech Research Group 11
IT Department Enablement
Effective budgeting can provide these benefits
Budgetary approval can make or
break your year. A good budget
proposal can get you the funding you
need to meet business needs. A bad
budget proposal can result in downward
cost pressure that decreases service
levels.
A solid budget proposal is a
planning tool that will help govern IT
operations. A good IT budget outlines
your IT department’s future costs,
which are directly traceable to what
your people will actually be doing. The
budget can be used to guide projects
and operations, track cost-budget
variance, and make ad hoc adjustments
to spending.
Doing IT budgeting right this year
will make IT budgeting next year
easier and more accurate. A sound
forecasting methodology is a lasting
asset that will aid future IT financial
planning.
The budget process itself is
draining, difficult, and strenuous,
especially when the budget needs to
be reworked multiple times.
Submitting a good budget and
presenting it with a compelling
presentation improves the chances of
approval the first time, saving time and
energy.
Operational and Project Planning
IT Financial Management
Faster Budget Approval
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3
2
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