Gartner research reveals that when it comes to preparing the IT budget, CIOs and IT leaders often work in isolation.
The IT budgeting process, which takes up to four months to conduct, usually works without a clear understanding of the business’ overall strategies and objectives and finds itself misaligned with the larger goals of the enterprise.
The dysfunctional IT budgeting process
Gartner research reveals that this disconnect happens because:
- IT budgets typically focus on individual general ledger line items, rather than on the larger enterprise goals.
- The budget is viewed as “fixed” and lacking flexibility to fund the right things to enable the success of the enterprise.
- Investment decisions are too often driven by whether the spend is operating expenditure or capital expenditure.
While some enterprise strategic planning processes also suffer from similar challenges, it is essential for CIOs and IT leaders to be aware of the disconnect between enterprise planning process and IT budgeting.
They should, then, attempt to close this gap by making enterprise leaders aware of the investment “lead time” that IT needs to support strategic objectives. Also, instead of focusing on the IT budget primarily as a collection of line items, CIOs and IT leaders should use the budget process to ensure the right business decisions are being made which are in-line with the larger corporate strategic direction.
Sample Investment Evaluation Criteria Source: Gartner (March 2014)
Aligning IT budgets to corporate goals
Gartner’s recommendations on how enterprises can align their IT budgets to achieve larger corporate strategic goals:
- View IT budgeting as part of the overall enterprise plan. Work closely with business unit leaders to understand how they will execute on the objectives that come from the enterprise strategic planning process.
- Make IT budgets flexible and agile. This generally requires shifting fixed costs to variable costs, over time, and focusing on the prioritization and alignment of key initiatives, not individual line items of spending.
- Leverage a solid business case process to ensure that all investments across the enterprise are driven by value to the enterprise and not whether a particular spend is OpEx (operating expenditure) or CapEx (capital expenditure).