Worldwide IT spending is projected to total $3.4 trillion in 2020, a decline of 8% from 2019, according to the latest forecast by Gartner.1 While it can be tempting to plan for this decline through across-the-board flat cuts, the most successful IT leaders require a more surgical approach. CIOs need a planning and analysis solution that surfaces timely insights and enables strategic conversations across the C-suite.
The opportunity of budgeting and planning in 2021
Organizations that thrive in periods of disruption are those agile enough to re-plan and re-forecast quickly.
Many organizations lack this agility because finance leaders are using spreadsheet-driven planning processes. This is especially true for IT departments, where corporate finance systems are incapable of providing the granular detail needed for managers to make data-driven decisions.
IT spend is becoming more difficult to manage due to the complexities of IT costing models and the pressure to achieve tighter planning cycles (e.g., quarterly, monthly, continuous). The existing process is cracking under the pressure of dynamic customer demands. Technology’s opaque and complex cost structures prevent informed decisions to eliminate or re-align spend to fund business-critical investments—resulting in duplicate spend, budget padding, and unfunded growth initiatives.
IT leadership struggles to hold budget owners accountable for their actions. This is table stakes when no one knows when we are coming out of this current disruption—or what further disruption is around the corner.
This article calls out the steps to improve your planning process in 2021—and how Apptio IT Financial Management Foundation can help you take them.
Four steps to budgeting and planning in 2021
#1 Stop wrangling spreadsheets
Excel-based systems are inherently brittle, static, and tedious to maintain, causing friction in every financial management process. Manual data aggregation and cleansing from disparate systems drains energy/focus and renders optimization opportunities invisible. IT Finance becomes reactive instead of a strategic business partner.
Apptio IT Financial Management Foundation shifts effort from low-value data aggregating and cleansing to insight generation and strategic recommendations. As a purpose-built IT financial management solution, Apptio provides a single source of truth, built on a standards-based cost model with a granular view of technology spend that accurately communicates insights to key business leaders across an organization.
#2 Accelerate the budget process
Homegrown systems served the business thus far. However, these systems aren’t fast, agile, or resilient. Manual data processing from disparate sources inherently bakes lag-time into a model. When deciding to re-align investments with shifts in business strategy, most models lack the level of granular visibility and responsiveness needed to run effective what-if scenarios.
Apptio IT Financial Management Foundation conducts responsive forecasting and scenario planning. Cost optimization insights identify opportunities to cut, postpone, or reinvest in critical priorities.
#3 Reduce padding and fund innovation
Budget padding gives IT cost center owners budgetary protection for their projects and programs.
Unsure if they can adjust mid-year if their calculations are wrong, they view the annual planning process as their one chance to pad their budget to ensure it arrives intact at year-end. Budget padding is a defensive posture—enforced by an inefficient planning process.
Apptio IT Financial Management Foundation accelerates the establishment of a new funding model baseline and reduces variance or padding to within 1% of plan. Shifting spend from run to grow by 3-5% annually provides finance and product teams with a single integrated solution to organize cost data, optimize, and plan and track product technology investments.
#4 Translate the strategic plan to the operation plan
Inefficient technology spend—due to siloed decision making—leaves the business with an incomplete understanding of the fully-loaded cost of technology decisions. This disconnect between strategy and operations undermines credibility, trust, and partnership—making IT more overhead than a valued business partner. Already on the back foot, IT finance is stuck in a reactive swirl causing delayed decisions and potential missteps.
Apptio IT Financial Management Foundation drives accountability and predictability via a common language to enable collaboration between cross-functional stakeholders. Equal access to information and processes gives CIOs and CFOs a common foundation to make rapid, confident decisions. This gives IT finance teams a “seat at the table” by freeing up time to become a thought partner and not a data or spreadsheet processor.
For a deeper dive, read the ebook Budgeting and Planning in 2021.