In 2019, IT budgets will maintain 2018 levels, thanks to favorable business climates, and organization's recognition of the needs to advance initiatives in security, digital transformation, and cloud-based technologies.
More IT budget spend will move to end user departments, which are often in the best position to prescribe the types of IT needed for business. Whether it's end users or IT that does the budget precut proposing, CFOs and CEOs will expect convincing reasons for acquiring new technology. They also want to see expected payback period on investments.
Internet of Things (IoT) will continue to experience tempered spending, as it did in 2018, because IoT remains a nascent technology in many organizations and many are still learning about it.
As in 2018, major IT spending in 2019 will continue its focus on security and on investing in other internet-facing hardware and software that secures the edges of enterprise networks.
Here are seven keys to 2019 budgeting for CIOs and other IT leaders.
1. Expect more technical questions about the technologies you are proposing to fund
The CFO and other budgetary decision makers continue to catch up on new technology trends. They are likely to ask more specific questions about technologies -- how the technologies work, and what they bring to the enterprise. They will also ask more questions about pilots and proof of concepts, and they expect these new technology investments to work.
Finally, CIOs and IT staff are advised to walk into budget meetings with return on investment (ROI) figures, as they will be expected to talk about the financial side of each technology project that they propose
2. Be able to answer questions about financing options
CIOs and IT leaders will expect to come to the budget table with an array of financing options that they already discussed with their vendors. These options might include outright equipment purchase agreements, agreements to buy back old equipment, lease-to-buy options, pure leasing options, pay-per-use options, deferred financing options, and even options that use a cloud-based pay-per-use financing model to apply to both on-premises and cloud-based systems. These pay-per-use cloud models used to be strictly based upon users. Now with IoT part of the cloud usage equation, pay-for-use might also include and charge for IoT device access in addition to 'real person' user access. Definitely prepare to discuss all of these options with the CFO.
3. Collaborate with stakeholders before budgets are presented for review
Shadow IT is growing. This means that end users -- not IT -- are making technology buy decisions. Knowing this, best-of-class CIOs actively collaborate on the technology budget with end users. These end users can be vital allies in budgetary reviews. For example, the marketing VP can join the CIO in arguing the importance of establishing an analytics program for sales and market forecasts.
Great CIOs understand the balance sheet and income statement ramifications of IT investments based upon how these investments are expensed (capital, longer-term investments are amortized over a period of years, while operational expenses are expensed within the year's operating budget, for example).
These CIOs also understand the cost of various financing options and what it's like to stand in the shoes of the CFO -- who usually is the toughest person to sell on a new technology purchase. To ensure that there are no unforeseen technology surprises, many CIOs get together with their CFOs in advance of budget discussions.
5. Challenge your staff
When budget season opens, your staff will come to you with all kinds of tech recommendations. However, not everything they ask for will be what they absolutely need. Ask them to identify their must-have items and present their budget justifications. If your staff can't convince you, it's unlikely that others will be convinced either.
Making sure your house is in order is part of any budgetary process. What ageing assets are coming off depreciation schedules? Will this have a favorable impact on budget formation? If these assets are coming off the books ask if they also need to be replaced?
Most IT departments keep track of the large assets -- but the tracking of old PCs, printers, and other equipment that's collecting dust in the IT backroom or in remote sales offices is often overlooked. Don't forget these items.
7. Pay attention to how you schedule discretionary budget items
Companies have good and bad years for revenue and expenses. Since your budget could be revisited and downwardly revised midyear, always schedule your most critical discretionary expenses in the first and second quarters so that you can make sure they get done. Items you can afford to defer should be scheduled out to the third or fourth quarter, in case you're asked to hold the line on your budget in midyear.