What are the best practices for managing IT budgets as a CIO?
practices for managing IT budgets as a CIO
As a CIO, you want to keep IT costs low—not only because this is the right thing to do for your team members and company as a whole but also to ensure that your IT structure is built to last. Excessive IT expenses can be stressful to you, as a leader; your team; and your organization’s bottom line. Fortunately, there are many strategies you can use to control IT costs and ensure that your department is well-aligned with strategic business goals.
To begin, you should take a fresh look at your CIO coaching budget. Reviewing and auditing previous IT budgets can be an effective strategy because it gives you a baseline to compare against. This allows you to see how your IT spends have changed over time and identify areas that could benefit from a shift in strategy or direction. For example, if your enterprise is spending too much on software licensing, it may be time to move away from the legacy products and toward new cloud-based solutions that can better support your growth.
Additionally, you should examine your IT budget’s overall makeup to identify potential savings. According to Gartner, IT spending is typically comprised of 75 percent fixed and 25 percent variable costs. For example, if your IT department is spending too much on hardware, you can make the case to senior management that by moving away from legacy equipment and embracing new technologies, the business will see a return on investment in the form of cost-savings.
What are the best practices for managing IT budgets as a CIO?
Another area where you can often find substantial savings is within your IT infrastructure costs. IT leaders should evaluate the total cost of ownership (TCO) of existing IT infrastructure, and look for opportunities to reduce the TCO through automation, leveraging new technology, changing business models, or reducing the IT budget itself.
While IT budgets are not carved in stone, it’s important that you and your board understand the economic realities and can articulate the risks of over- or under-budgeting. CIOs can also use the budgeting process to communicate a clear, well-defined IT strategy that will support the business’s goals—instead of merely trying to cut costs in an arbitrary way.
A robust IT budget can give you an accurate picture of your current spending, as well as a view into the future. With the help of benchmarking organizations, consultants, or simply a call to your peer at another company, you can also use an IT budget to compare how you’re doing compared to similar departments.
Finally, the best IT budget practices include an emphasis on transparency and accountability. You should be able to track expenditures and account for all IT costs in your budget—from hardware and software licenses to third-party maintenance fees and cloud services. This can prevent budget creep, which is when an IT department’s costs grow unnecessarily and are hard to identify. You can avoid this by creating a system that is accessible to all IT department team members and provides them with tools to track expenses.
