5 steps to getting your IT budget under control

We often meet with CEOs or CFOs who feel like they are constantly banging their heads against a brick wall when it comes to their IT budgets. For them, IT spending feels unplanned and unproductive. The Board are frustrated and (guess what!) the IT team is frustrated as well. It feels like money is spent on the wrong things, and IT rarely seems to deliver.

Here are five steps to get this situation under control.

1. Make sure there is clear IT leadership.
It’s impossible to run a business without IT, so the Board need to understand they have to spend money on it. And a competent member of the senior team – someone with business and tech experience – needs to understand the IT budget in detail, to take accountability for it, and to own its successful delivery. Too often, no-one around the Board table is really able to say for sure if the spend is appropriate – if your business is in the sweet spot between not under-investing and not getting ripped off by suppliers.

2. Ensure the business strategy and the IT strategy are aligned.
The IT expenditure always needs to be justified in terms of its alignment with business goals and if there’s a clear ROI. Each and every IT project needs to be mapped to business objectives and fully costed; efficiency savings or sales uplifts must be identified. (For help thinking it all through, book a free IT assessment for growth.)

3. Figure out what’s normal. 
Getting budgets under control is much easier when there is a consensus about what’s normal. Average spending on IT varies between sectors, company size, and other factors; benchmarking yourself against these averages can help create a consensus around what is normal and what your level of IT spend could and should be.

4. Re-examine your insourcing / outsourcing strategy.
Outsourcing can be a good way to rationalise IT and save money, but too often companies outsource the wrong things. So consider which aspects of IT are just commodities and which are core aspects of your business value. And if you are making serious outsourcing decisions, then go through a proper tendering process. When you are keeping IT functions in-house, make sure the senior team are able and committed to managing them well (see point no. 1 about leadership).

5. Refresh and replace where necessary.
Old kit needs replacing. It becomes unreliable, expensive, and incompatible. You can pretend that’s not true, but then sooner or later you’ll run into unbudgeted problems. Or you can agree on a replacement policy and plan accordingly. It avoids unpleasant surprises, as well as freeing up time and energy for proper discussions about how IT can really make a difference to the business.