Step #1: Research
You will want to start by reviewing the previous year and track what was spent, categorizing the findings into hardware, software, and licenses. Also, make sure to review credit card statements in addition to written paper checks. Then subcategorize those into one-time and recurring expenses, i.e. monthly or annual subscriptions. You need to understand the breadth of items assigned to the IT Budget. If there was a budget last year, it’s time to compare, how did the IT department do? Did we come in under or over budget? These items give us a baseline understanding of what to expect for creating this year’s budget.
Next, get your arms around your current assets. Take inventory of all IT equipment. (And we mean ALL of it!) We want to gather data such as when each item was purchased, the warranty status, whether the software is up to date, and of course, licensing. Will marketing need that Adobe CC subscription again this year? How many Office 365 users are you paying for? After completing this step it’s time to meet as a management team. Ask about the projects and goals for the next few quarters or even the next few years. Ask about things like hiring needs and software updates. Use this time to get a pulse on how the current technology is working for employees. Lastly, you will need to clarify what should be in the IT Budget versus being allocated to another team or department’s budget.
Step #2: Proactive Asset Management
It is incredibly important to know the life-cycle of your equipment. So, using the inventory list created in step one, you will create an Asset Life Cycle document. This is where the purchase date and warranty information we collected come in. Now, there are special circumstances, but for the majority of our clients, we recommend replacing PCs every 3-5 years. A good rule of thumb is 20% per year. For networking equipment, 5-7 years is typical for a refresh. If that number seems daunting, remember you can save money by buying PCs in bulk. With this information, we can see where each piece of tech is in its life-cycle and budget for its replacement. Once this document is started, it’s just a matter of keeping it up to date.
Step #3: Understand Your Recurring Revenue
As you may well know, almost all software seems to be on a subscription-based model these days, requiring a monthly or annual cost. Hardware also comes with licensing costs which are typically annual spends. Side note here: when it comes to these “subscription-based models” we recommend buying longer licensing periods up front to take advantage of additional discounts. So, step three is to look at all these costs and break them down into monthly, yearly, and multi-year expenses so we can properly allocate when the dollars will be spent. We need to dig deep to find all of the sneaky subscriptions that might be lurking beneath the surface, and again make sure to check credit card statements. These charges can add up and are easy to forget!
Step #4: Putting the Budget Together
Drafting your budgets. You’ll now take all of the data we’ve compiled and form budget sheets for, one, three and five-year outlooks. For the upcoming year, we need to think about immediate needs. What’s broken and needs fixing? Check out your asset life cycle sheet to see how many PC’s should be replaced, and if you have any networking equipment that needs an upgrade. Add the annual cost of any recurring subscriptions, and any upgrades to accommodate planned growth and scheduled upgrades. Year one budget…done!
Now, make plans for what will need to be replaced or purchased in the upcoming years. Account for maintenance, business as usual, but also to expand according to the company’s growth goals. This will show that you have done your homework and that you are working hard to bring a predictable spend to what has been chaotic in the past. Make sure to buffer for the unexpected by building in an extra margin for those unforeseen circumstances.
Step #5: Strategic Planning
Make sure your budget aligns with company goals. This is a big one! As you prepare to pitch your budget to the rest of the management team, use the data you uncovered in the talks with leaders in the company to truly understand how technology will help them meet their goals and their objectives. For example, if you know that your company plans to hire 50 new people over the next three years ensure the budget that reflects the additional user count and draw on the network. The goal is to never have technology inhibit a user, a team, or the entire company from reaching its goals.
Step #6: Implement!!!!
There’s no reason to go to the trouble of doing all this research and preparation if you’re not going to implement your budget. If you have questions or need assistance in assessing your current infrastructure the folks at ACS would be more than happy to assist. We have worked with many businesses to help organize and forecast their IT needs. Please contact Chris Mackin by email or 507-238-6334 to discuss your needs and how ACS may be able to provide this important information.