IT budgets will be slightly more robust in 2018, thanks to overall business optimism about the economic environment. This optimism will open up some budget wallets -- although the level of scrutiny on what you propose as a CIO or an IT leader might be higher than it was last year.
Data analytics, a major corporate investment area over the past five years, will see smaller investments in 2018. The reason is that CEOs and other C-level officials feel that they have done enough investing in analytics -- until they begin to see more business results from the investments they have already made.
Other big data technologies, like the Internet of Things (IoT), will also see tempered spending because IoT is still a nascent technology in many organizations.
Instead, major IT spending will be focused on security and on investing in other internet-facing hardware and software that secures the edges of enterprise networks.
Here are eight keys to 2018 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 have been catching up on new technology trends. They are likely to ask more specific questions about technologies -- how the technologies work, and what they will bring to the enterprise. CIOs and IT staff need to go deeper into technology discussions with these decision makers, but they must also make sure that they explain technology clearly and in plain English.
2. Be prepared to do more ROI homework than you've done in the past
Hypothetical return on investment (ROI) calculations for new technologies aren't going to convince decision makers as easily as they once did. CFOs and other budget evaluators will be asking you for ROI results from actual proofs of concept and pilot projects that can demonstrate to them that your company will get back its original investment for the technology you are proposing.
3. Be able to answer questions about financing options
CIOs and IT leaders will be expected to come to the budget table with an array of financing options that they have 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. You should be prepared to discuss these options with the CFO. As an example, funding discussions can quickly turn from funding an asset and depreciating it to seeing how it can be expensed without the need for depreciation.
SEE: IT budgeting: The smart person's guide (TechRepublic)
4. Collaborate with stakeholders before budgets are presented for review
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.
5. Understand the role of the CFO
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 and 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.
6. 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.
SEE: Shore up your defenses: Budget extra for an IT audit in 2018 (Tech Pro Research)
7. Revisit ageing assets
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, do 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 might be collecting dust in the IT backroom or in remote sales offices is often overlooked. Don't forget these items.
8. 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 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.