Budgeting for Information Technology
September 2007 (More monthly articles)
For many associations budget season has arrived, the time when plans need to be made for the revenue that will be generated and the expenses to be incurred in calendar year 2008. Have you seriously considered your technology needs for next year? Do those expenses line up with your strategic plan? What goals and objectives found in your organization’s strategic plan involve the acquisition of information technologies? Are the costs associated with those technologies included in your proposed budget?
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Because budgeting is one of the necessary components of managing an organization, this article is devoted to helping you adequately plan for your information technology needs next year. One recommended strategy is to divide your IT spending into two categories. The first category is for new projects. Items here include new IT initiatives being planned, such as a new website, a greatly improved e-Commerce system, a new grassroots mobilization system, or even a new compliance reporting system. Think of these as new or enhanced systems. They tend to be easy to explain to the board because they have a clear purpose.
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The second category of spending can be classified as maintenance costs. This group includes items such as software maintenance fees, hardware, T-1 / DSL / Cable connections to the Internet, support agreements, support calls, website hosting, and the like. This category can gobble up a whopping 70% of the entire IT budget and usually creates the most heartburn with the board. Over time, this number often grows as more and more new projects require ongoing maintenance and support.
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How does one convince the board that these expenses are necessary? First, you must make a business case for all spending. Be ready to explain why you need $50,000 for telecommunications services or $25,000 for software maintenance and licensing. To the extent possible, itemize expenses as supporting documentation. Second, do your homework. Don’t assume that a new project is self-explanatory or that the benefits are clear. Discuss your goals with other staff. Get feedback from trusted members. Can you calculate ROI? If so, what is it? For maintenance costs, ask yourself, “What are the ramifications of not spending the money? Will the service stop functioning? Will you be out of compliance? Can you get support if troubleshooting becomes necessary?”
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Use benchmarks to make your case. If the IT spending for the industry you represent is 3.75% of gross revenue, for example, and yours is only 2.8%, use that argument to your advantage. If your organization is a charity or a professional association, find out what the benchmark is for other similar sized charities or professional societies. Other useful benchmarks include a breakdown of IT expenses by line-item and IT staff ratios.
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Be prepared with plan B if funding is cut. Perhaps you can outsource a service to save money. Using virtual server technology can save on hardware costs. Software-as-a-service, or SaaS, is another new cost-saving idea that seems to be gaining momentum.
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Consider having lunch with the chairman of the board or the finance committee chair to get their feedback, assuming your by-laws permit such consultations. Having a board member on your side will go a long way toward winning over the rest of the board.
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Finally, give your presentation a dress-rehearsal in order to be ready for the big day. Obtain honest feedback. Was it too long? Were the important points emphasized? Were you convincing? What were the positive elements that seemed to hit home? The better prepared you are, the more likely you are to walk away with the financial backing you need in order to accomplish the goals of the organization.
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