SmartAdvice: Build Facts And Allies To Get Head Start On Budgeting
Start now to identify budget strategies and then stick to the party line, The Advisory Council says. Look at your company's long-term commitment to particular software vendors and business strategies when considering open-source software; and think through access to your resources and who's responsible for security before outsourcing.
Editor's Note: Welcome to SmartAdvice, a weekly column by The Advisory Council (TAC), an advisory service firm. The feature answers three questions of core interest to you, ranging from career advice to enterprise strategies to how to deal with vendors. Submit questions directly to firstname.lastname@example.org
Question A: I want to get a head start on the annual budgeting process. What are some steps I should take now to engage the business in the process?
Our advice: A head start on budgeting is a really good idea. It lets you identify what your budget strategies will be, what allies you need to make before the process starts, and which things you can surrender gracefully and which things you have to defend to the death. So ...
Understand Your Fixed Costs
You have some run-rate items that you can't do much with next year (e.g., hardware leases, communications costs, hardware and software maintenance contracts, corporate allocations). It's tempting to take your last three months of actual costs and draw a straight line for 12 months. Careful. Did you just add a monster server that's not in last month's lease or maintenance costs? Are you planning to replace 4-year-old servers with new ones at a lower cost?
Your vendors can do some homework for you here. Ask them to forecast your expenditures with them next year. They'll throw in wishful thinking, but they may catch some stuff you missed.
Remember the truism: "In the long run, all fixed costs are variable."
Understand All Your Staffing Options
At some point in the budget process, you may be told to cut payroll 5%. Know your options ahead of time. Identify the most price-aggressive contractors in town. Identify the applications that can go into "no enhancements, break-fix only" maintenance. Check if there's anyone left on staff whose loss would cause no reduction in output. Check that you really need all the layers of management that you have.
Then game plan: "Cut everything 5%."
Project The Application-Maintenance Commitment
This year you had X full-time equivalents working on maintenance and Y full-time equivalents working on development. Darn! The development guys delivered, and now half of them are needed to maintain the new application. If management wants the same level of new development, you can hire more people or reduce maintenance on older applications. Pick a strategy, and start to explain the issue before the budget process begins.
Stay Out Of Project Priority Fights
You may have a rare year in which the top-priority project is obvious. Most years, there are more projects requested than you can afford. Whatever you do, don't choose the "winners" yourself, and don't let yourself become the champion for any one project. You don't want to argue publicly for an increase in your IT budget to be offset by reduction in a peer's operations budget. You want that peer to argue for the increase in your budget, and you want him or her to offer up the reductions in his or her budget as offset.
Get to your key users one on one and test how passionate they are about some new project. Offer to help them structure the cost-benefit argument. Offer to confirm the technical viability of the systems they want. Do not offer, however, to fight their fight.
In parallel, have your staff design "mini-projects" for the losers to reduce their pain in the short term. If these mini-projects are ready to be put on the table when the bad news is announced (that someone else is getting the "big project"), you can relieve a lot of tension and make a lot of friends.
Understand Your Company's Competition
"Schmidlap Chemicals already offers collaborative forecasting" is a great budget defender.
Train Your Staff
Hopefully, your staff has been working with you on all of the above. One last off-site meeting is needed to agree on the list of talking points, so that your whole group is giving the same message at all levels of interaction in the company.
Drive Business Value
The budget process is a zero-sum game. You'll need facts and logic and allies and preplanned lobbying to defend the funds you need.
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