It’s budget time....

Added by The Editor, 9 months ago.

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Working out the IT budget for the coming year is a task that few IT directors and CIOs look forward to with relish. How much cash should be allocated to simply keeping existing systems up and running, and how much should be ploughed into new strategic initiatives like virtualisation and service-oriented architecture (SOA) projects?

At a time of continued economic uncertainty, that task is harder than ever - which is why analysts at IT market research companies are advising IT departments to create two budgets for 2008. The first, they say, should reflect the guidance already provided by senior decision-makers, but this should be supplemented by a second ‘back-up' budget that assumes the need to cut costs in response to the arrival of a business slowdown.

That might sound like double the hard work, but Gartner analyst Ken McGee insists that there is a sound reason behind that advice. "Although the financial outlook for 2008 remains far from certain, waiting for a clear economic trend to appear prior to taking action is not a prudent option," he says. "There is already sufficient concern about the possibility of a business slowdown for next year from enough credible and independent sources to suggest that preparing a backup cost-cutting IT budget now is just plain good management."

According to McGee, CIOs need to have a ‘recession budget' and business plan ready for immediate implementation long before being asked to reduce costs. To be meaningful, Gartner recommends that such plans should target a decrease in IT spending of at least 10 per cent below the highest annualised IT spending run rate levels attained in 2007.

CIOs and IT managers who play their part in preserving as much enterprise profitability as possible will benefit the wider organisation, he says. "Creating a responsible alternative recession IT budget now will demonstrate the type of innovative and forward thinking that senior executives expect to see from their staff. It will also show the kind of flexibility and agility needed to respond to fast-changing economic and business conditions."

Comments

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Chris Gabriel, 9 months ago

George, virtualisation is absolutely a pay now save later strategy, but, the payback can be extremely short; was talking to one customer today who had to move their existing infrastructure to a hosted environment and the virtualisation payback was 4 months (extreme I know but real). I also think that Virtualisation will stop many a data center filling to capacity in the next 2 or 3 years, and the cost mitigated of a new DC by virtualisation could be worth the much less painful request for funds. Finally, how you sell it depends on what the business needs. Virtualisation allows faster deployment of services, so the business might want agility more than they want responsibility. It also enhances continuity, and that might be the big issue for the business. So, virtualisation isn't just about environmental efficiency, so positioning the project to the businesses key challenges could make 1 £ spend on virtualisation pay back in agility, continuity and responsibility, and that could be very attractive to the business.

george9, 9 months ago

I guess virtualisation is a conundrum, because it represents the kind of project that will provide significant cost-savings in the longer term, but it requires up-front investment. Any advice on this specific issue?

Martin Hodges, 9 months ago

Without meaning to sound too much of a cynic, I wonder how many finance directors will simply push for the cost-cutting version, even if it means that the business doesn't run as efficiently in the long term?