IT Budgetting (1)

IT budgeting is an important subject for IT managers and CIOs around the world. This importance comes from its’ being a decisive factor in the success of the IT department by ensuring that sufficient financial resources are available for the sustainability and the growth of the IT department and its services.

A Budget is defined as an itemized forecast of an organization’s income and expenses for a futuristic period. The budget can be structured in many ways based on the organization’s (or the country’s) standards.. One of the widely adopted approaches for structuring the budget is to build the budget on the basis of two main categories:

- Capital cost: concern the purchase of assets intended for long-term use within the organization
- Operational cost: day-to-day costs that are not associated with tangible production resources

The Budgeting Process is the process of ensuring that the correct finance is available for the provision of IT Services and that during the budget period they are not over-spent. The budgeting process is a cornerstone of the IT Financial Management process which is responsible for the identification, calculation, monitoring and onward allocation of costs for the IT Services.

The budgeting process is split into two separate but related processes; setting the budget and monitoring the budget.

The process of setting the budget is mainly concerned with preparing the budget for the coming fiscal year or period. The process of monitoring the budget is concerned with ensuring that the budget of the current fiscal year is spent properly.
Monitoring the budget is also concerned with foreseeing and reporting any deviations from the allocated budget. It is important to establish the governance of the IT department over all IT-related budgeting in the organization; this is the only way to establish full accountability on the IT assets and resources. In more practical terms,
no department should be allowed to allocate IT-related cost in their budgets. Departments must request any IT spending from the IT department. Without achieving this, IT departments will not be able to control IT assets in the organization.

In the companies that have IT Support, each organization is requested to follow the standard budget structure and its guidelines for reporting their yearly budget. The standard budget structure is meant to be generic in order to cater for the different needs of the company regardless of their nature.
However, it is noted that currently there are no clear IT-related categories or elements in the budget structure of organization.
This fact creates difficulties for company in allocating the IT budget properly and tracking the IT spending.