When preparing next financial year’s budget, it may seem easy to take last year’s budget, apply some CPI adjustments, any known contract changes or initiatives you’re planning to fund, and there you have it: a budget.
However, the risk with this approach is about missed opportunities. Budget time is an excellent opportunity to unpack where your overspending and underspending has been in the current or previous years. You can then use that information to really consider what your spending needs to be in the following year and come out of the process with an optimised budget for your organisation that strongly aligns with business goals.
In this blog 9Yards senior consultants Jodie Rugless and Shannon Slater share their insights for a budget that drives value for your business and your customers.
Three budget categories to start the process
Rugless identifies three key areas that a budget needs to cover. She also recommends starting from a zero-base budget.
“We generally recommend starting with a zero for every budget line, because it allows you to focus on achieving your business outcomes. Your operating budget can certainly be informed by the previous year, but starting from zero is a very good and critical way to focus on what’s coming next.”
- Operating budget. These are the costs that occur on a regular basis from an operating perspective. They may include those monthly fees that are already in place, your salaries and wages, and recurring costs such as software licensing fees.
- Replacement program. This is your infrastructure replacement program, covering your recurring replacement of infrastructure, including your desktop fleet, servers and other infrastructure. Some organisations may also manage this expense category under a capital program budget.
- Special projects budget. This is really where those innovation components and opportunities to uplift capabilities across the organisation come into play.
Operating budget
Your organisation’s needs are likely to change from year to year. As an example of the kind of question you could be asking, if you are undergoing digital transformation there’s a huge benefit in investigating your software licensing and understanding what you need going forward. It’s easy to fall into a trap where you just accept that the software licensing fees you paid last year is what you need to pay next year. Question the value of that software to the organisation and avoid a situation where software that you were paying next to nothing for five years ago is now costing you a significant amount with no real increase in value to the organisation or your customers.
Replace Aging Technology and Address Technical Debt
When it comes to replacing aging infrastructure and technology, you probably already have a multi-year asset replacement plan, for example computer fleet replacement every three years. In line with this existing long-term replacement approach, you have a long-term cost model for your asset replacement.
Even with this long-term replacement plan in place, it’s worth checking if your replacement strategy is in line with what your organisation currently needs. Aging technology extends beyond hardware and includes legacy systems, outdated software, and unresolved technical or security debt. Have a critical discussion about whether your asset replacement program is actually on point.
Special projects
The special projects you’re planning for should all be supported by very strong business cases. Once again, your budget is an opportunity to have a look at those business cases, along with any ongoing projects. Make sure that your planned projects are delivering according to the needs of the business. Are there ways that you can achieve what you want to in a more cost-effective way, considering the value to the business?
9Yards services to support your budgeting
We find that often people cringe at the job of budgeting. What we’ve seen, however, is that it’s actually the best time of year to take a reset and make sure that the investment that you’re putting in your technology budget every year is delivering the value you want.
As an external organisation with experience and track record in business strategy and digital transformation 9Yards can offer:
- independent assurance over your budget. This would involve a review of your completed budget and identifying further opportunities for optimisation.
- an expenses audit. An external audit on expenses that you may be incurring in your IT budget will help you identify how they compare within your own sector and with other industries. This kind of benchmarking will help make sure you’re not paying too much for your solutions.
- an independent overlay of technology spend relative to your business capabilities. A technology capability overlay can identify areas of spend where your technology decisions are not supporting the value proposition that your organisation offers your customers. Our focus will be on what gives the maximum benefit to your business.
Talk to the expert team at 9Yards about how our holistic approach to technology and business strategy can inform your financial decision making and get top value from your technology investment.
