(October 9, 2023) In the not-too-distant past, technology was considered a luxury, often reserved for a select few business functions and senior executives. Today, technology has become critical to business operations. In a recent Techaisle study of midmarket executives, nearly all said that IT is a core component of business strategy discussions.
The fact is, that many organizations can’t function without technology. Beyond day-to-day business functions, the services provided and capabilities enabled by technology create competitive advantages and revenue streams. As a result, organizations need to make wise IT investments from both operational and strategic perspectives.
That can be difficult in a tough economy. According to the State of IT 2024 study by Spiceworks and Aberdeen Strategy & Research, two-thirds of organizations plan to increase their IT budgets next year. For more than half, however, the increase is driven by a need to upgrade outdated IT infrastructure rather than investments in new technologies.
The Cost Center Conundrum
Unfortunately, IT is still widely considered a cost center in many organizations. Technology is necessary to keep operations running, but it isn’t viewed as driving top-line revenue or bottom-line savings. With that mindset, management may keep the IT budget flat and mandate cuts to offset needed upgrades.
In some cases, cost-cutting may be necessary, but organizations need to make informed decisions when reducing the IT budget. Do you know the true cost and value of each asset or system on the chopping block? How will one cut impact other parts of your infrastructure? Are you saving real dollars or just kicking the can down the road?
It’s also important to determine how the organization can use technology to improve productivity and develop innovative products and services. Are you automating as much as possible? Can you better leverage technology to take advantage of market opportunities? These and other questions must be answered before cost-cutting takes place.
Finding the Baseline
Ideally, the IT budget should be aligned with business goals. Achieving such alignment can take months. However, organizations that are only interested in cutting costs focus too much on individual line items and short-term savings rather than big-picture decisions. They get hung up on capex vs. opex, and the budgeting process lacks the flexibility to make IT investments that drive the organization’s success.
To eliminate this disconnect, Gartner recommends creating a baseline budget before making any material changes. When appropriate, use zero-based budgeting, which requires all investments to be justified annually, to build a detailed budget while retaining the flexibility to account for evolving business needs. Make sure you budget for all known IT costs, benchmark IT spending and staffing, and provide full transparency in your budget.
Aligning with Business Objectives
The budget should also make a direct correlation between IT tools and talent, the value of strategic initiatives, and organizational goals. Work closely with business leaders to integrate IT budgeting with the overall business plan and prioritize larger, strategic goals instead of line items.
For example, replacing older systems might be painful in the short term. However, it will likely deliver a solid return on investment in the long run due to reduced maintenance costs and greater performance. Remember, IT is a critical part of any organization’s roadmap to sustained success, so you need to have a vision for five years down the road.
Mainstream specializes in helping organizations navigate the complexity of IT budgets. Our experts can help you define your short-term and long-term goals and determine which solutions best suit your objectives. We can also identify gaps in your IT infrastructure and redundancy that can be eliminated. Let us show you how we can use our IT process and cost optimization methodologies to develop a comprehensive IT plan and budget.
ABOUT MAINSTREAM TECHNOLOGIES
Mainstream Technologies delivers a full range of technology services in Arkansas and the surrounding region including managed technology services and consulting, custom software development, and cybersecurity services. We also offer industry-leading data center services in our Little Rock facilities. Established in 1996, Mainstream has earned a reputation for delivering quality, reliable, and professional technology services for public and private-sector customers across the United States.
Jeff Pracht
IT Business Development Manager
(479) 715-8629 Office
(501) 529-0008 Mobile
