7 Steps to Successful Technology Planning for Your Business

The annual budgeting process can be a time consuming, frustrating, and thankless task that very often gets pushed aside for more urgent responsibilities. Let’s face it – budgeting can be difficult – especially if you want to prepare an itemized budget rather than just pull together numbers based on last-year’s spending patterns. Preparing a realistic Information Technology (IT) budget presents an even greater challenge because of the pace with which technology changes occur. To provide some help, we present a set of practical steps designed to help make the process a little less stressful, and make the final IT budget document a little more meaningful.

First off, IT budgeting is a process, it is not an event. It is an important management function and part of the normal business planning process. It also helps an organization focus on its goals and objectives and how IT plays a role in meeting those objectives.

How you view information technology will determine how much time and effort you should spend on the development of your IT budget, and how often it should be reviewed and updated. For example, if you view IT as an expense item and your goal is to spend as little as possible on it, then you don’t need to expend much brain power to come up with a number. On the other hand, if you view IT as a strategic asset that will help give you a competitive advantage, increase your efficiency, and provide your customers with better service, then you need to put in some quality time developing your plan, and allocate time to review and adjust that plan on a quarterly basis. Let’s get started!

  1. Know your current situation. Determine what you spent this year and the year before on IT. Your financial statements should provide details of your spending, provided that it was categorized properly when the data was entered. This information will be used for comparative purposes, not necessarily to set next year’s budget. We also recommend having a detailed, up-to-date worksheet of your current hardware AND software inventory. Having a solid grasp on your inventory will allow you to plan for what may need to be replaced next year, and in the years to come. If you don’t have a list, we recommend the free network management software tool from SPICEWORKS. This tool will investigate your network and provide all the details you need to make wise decisions.
  2. Establish easily understood spending categories. A budget plan based on clear classifications will be easier to understand than a long wish list of disjointed items. We recommend classifying your IT investment into the following ten categories:
    • Hardware purchases and/or leases
    • Hardware repairs and maintenance
    • Software licenses and maintenance
    • Professional fees and support subscriptions
    • Application and Website hosting
    • Telecommunication and Internet related service fees
    • Supplies
    • Ongoing education and training for your staff
    • Disaster recovery and business continuity expenses
    • Other
  3. Decide how money is allocated. At this point you may need to make some basic decisions on how certain expenses get classified. For example, should designing, refreshing, or maintaining your website be considered an IT investment or a marketing expense? If the website’s information was printed, it would clearly be a marketing expense. Since the information is presented in a digital format, does that make it an IT expense? On the other hand, should the copier lease and supplies be classified an IT expense or an “office” expense? There is no right or wrong answer to these types of questions. You will spend money on both the website and the copier. It’s a matter of perspective and preference.
  4. Estimate spending for each category. Work through each of the listed categories and carefully plan what you’ll need to spend to achieve your business objectives. If we begin with hardware purchases for example, you would review your detailed hardware list and pick specific systems from the list and estimate the replacement/upgrade cost. We recommend that desktop and laptop systems be budgeted for replacement every three to four years. This doesn’t mean you have to replace them in that time frame, but it’s a good idea to plan for replacement. Be sure to include the network servers and network infrastructure in the mix as well. These components should be upgraded every four to five years. Also consider your telecommunications needs. Phone system hardware typically has a longer life span than desktop PCs, but the desire for new features and functionality may steer you towards an upgrade or replacement.
  5. Plan for growth. If growth is in your future, calculate the approximate IT cost for a new employee. Make it a comprehensive number including PC, monitor(s), software licenses, battery backup system, data protection system, remote access system, cell phone, printer, support costs, training, etc. Once you have this number, you can simply multiply it by the expected staff-increase number to determine how much to budget.
  6. Create your wish list. This step requires great thought and insight into the future of your business. Ask yourself these questions: Where will your business be next year and beyond? What technologies can help you get there? What investment in technology today will give you a better tomorrow? Perhaps a new or improved document management system, improved e-mail or collaboration tools, or easier access to information for remote workers. Perhaps you could benefit from faster Internet connectivity, or need a better way to track your inventory. If it’s something that technology can improve and you can make a business case for the investment, put it on the list.
  7. Put the pieces together. Once you have all of the mandatory items and wish-list items detailed, go back and put an estimated cost/expense next to each item. Use as much supporting detail as necessary to make it meaningful for you and those who will review/approve it. Be realistic with your estimates, but also consider adding a fudge factor (perhaps 5-10%) for unforeseen expenses.

Still feeling a little unsure of where to start? It never hurts to seek advice from a professional. Remember, IT budgeting is a process; it is not an event. It takes time, effort and a little expertise to do it right. If the whole process sounds like a daunting task that you would rather delegate, or if you need help with step 6, then seek out a qualified IT consultant who can assist you in developing a meaningful technology plan. A great place to start is by contacting Providence today!

Jeff Dettloff is the President and Chief Problem Solver for Providence Consulting, Lansing’s leading provider of advanced computer services and innovative technology solutions.

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