“The budget evolved from a management tool into an obstacle to management.”
Former Defense Director Frank Carlucci was talking about government spending when he made this comment but he may as well have been referring to those days leading up to the start of a new IT budget year. It’s that time when executives go scrambling to either spend what’s going to be lost, or more than likely, find more money to fund an important project.
In 2017, ordinary budgeting difficulties are confounded by both political (e.g., Brexit and the U.S. political landscape) and economic (e.g., sluggish economic growth in China) uncertainty. In fact, IT budgets can be set as much as 15 percent lower going into periods of political and economic upheaval and ongoing uncertainty, which often lead to predictions of a difficult year ahead. In tumultuous times, businesses aim to reduce risk by spending less. Here’s a look at how organizations are divvying up their IT budgets in 2017.
2017 Trends in IT Budgeting
The 2017 State of IT report, an annual survey conducted by Spiceworks, identifies some common threads in IT budgeting in 2017, including:
- Overall, annual company revenue, as well as IT budgets, are remaining relatively flat in 2017.
- Cloud and hosting services are major players in 2017.
- As mentioned earlier, global political uncertainty is having a big impact on IT spending this year, as the unsettling political climate is leading IT pros to spend with caution.
IT departments in the U.K. are actually facing slightly lower budgets this year, with a 5% decrease in budgets from 2016 – a loss mostly attributed to the uncertainty created by Brexit. Likewise, IT professionals in the U.K. report a year-over-year reduction in revenue by about 10%. Overall, though, 60% of IT buyers (59% in the U.K.) anticipate that revenues will recover in 2017, even jumping ahead as the global economy begins to stabilize.
What effect do these stagnant budgets have on staffing? As has become the norm in the IT world, IT departments will again be expected to do more with less – two-thirds of survey respondents say they don’t anticipate staffing changes this year, meaning they’ll be tasking their existing staff with the increased demands that are all but certain to continue.
Where is the IT Budget Going in 2017?
IT budgets aren’t likely to go towards increases in staffing this year, but where are IT buyers spending their funds in 2017? According to Spiceworks’ survey:
- 35% of IT budgets will go towards hardware projects (a decrease from 37% in 2016).
- 29% of IT budgets will go towards software projects (a decrease from 31% in 2016).
- 12% of budgets will be allocated towards managed services projects (a slight decrease from 13% in 2016).
- 17% of IT budgets will go towards hosted and cloud-based projects (an increase from 14% in 2016).
- Of the final 7%, respondents reported that they’re not yet sure where those funds will go.
Most investments in hardware will go towards desktops (18%) and servers (17%), although spending for both is slightly lower compared to 2016 data. Spending on laptops and tablets/mobile remains stagnant in 2017, taking up 16% and 6% of the IT hardware budget pie, respectively, while spending on networking drops slightly, from 10% in 2016 to 9% in 2017.
In terms of software spending, investments in virtualization (15%) and productivity (13%) top budgeting priority lists in 2017. Overall, spending across software investments remains relatively flat across categories:
- Investments in virtualization remained flat from 2016 to 2017.
- Investments in productivity fell slightly from 15% in 2016.
- Investments in OS software also fell slightly, from 15% in 2016 to 13% in 2017.
- Investments in CRM/ERP, database, and security remained the same: 10%, 10%, and 9%, respectively.
- Investments in backup/DR dropped slightly from 10% in 2016 to 9% in 2017.
According to Datamation, public cloud spending is expected to be up 25% this year, with private cloud spending up 17%.
Investments in managed services remain strong, with the biggest chunk of the managed services budget going to IT services (17%), consulting (15%), storage/backup/archiving (14%), and hosting (14%).
Of course, these are just a few of the major investments and budgetary needs facing organizations each year. Clearly, there is no shortage of priorities for most IT departments. Strategic initiatives, the need for infrastructure upgrades, accommodating growth, project and end-user needs, and software licensing mandates are a constant challenge and yet hiring freezes and the redirection of funding within an organization often make implementation difficult. What’s more, organizations have vastly different processes for IT budgeting. So how can today’s IT organizations slice up the budget pie while effectively aligning investments with business objectives?
Best Practices for Effective IT Budgeting
In my opinion, the answer to those once a year budget woes (and budgeting woes in uncertain times) can often be found in four areas; prioritization, funding, implementation, and monetization.
It seems simple but you’d be surprised by how many times the cart is put before the horse. Virtualizing desktops and networks is a major investment with a cost-saving upside but unless a company has clearly defined its “Bring Your Own Device” policy a VDI plan shouldn’t even be considered. Moving the data center to accommodate growth? Carefully and objectively reviewing hyper-convergence and public cloud potential is critical, as the best time to implement any or part of this solution is during a datacenter migration/upgrade.
Perhaps it’s time to get rid of that old PBX phone system and institute a truly unified communications approach. By their very nature, VoIP solutions are software-based and are meant to evolve as business priorities change. A new unified communications platform with the latest video conferencing, instant messaging, and speech enablement capabilities may be overkill and a real budget buster (you can always add capabilities later on). Prioritizing actual versus perceived needs is the better course of action.
Critical IT investments can often be made by simply finding creative ways to reduce or redeploy existing budgets. A telecom expense management audit (often funded by the savings it incurs) takes a look at existing wireline and wireless contracts and often reveals thousands, if not tens of thousands of dollars in unnecessary broadband spending (one of our clients was being charged $10,000 a month for a high speed connection to an office they had closed years before!). And sometimes you can save big time by simply getting your suppliers to pay. Companies like Microsoft set aside millions of dollars each year to supplement new technology assessments and investments. All you have to do is ask.
Often times, the high cost of implementing IT solutions can be borne by outsourcing or staff augmentation. Can’t handle incremental project workload with existing staff? New technology requiring specific expertise, and spikes in workload as a result of short-term projects, can be handled less expensively and in many cases, more efficiently, by temporary personnel. You don’t need to outsource the entire project but management may be the most logical place to start. A project manager can attend and lead facilities and departmental meetings, coordinate and manage critical milestones, and most importantly, train your staff to take over the role once he/she is gone. By focusing internal resources on core business functions, training time is reduced without adding permanent overhead.
Who doesn’t want to make money off of their investment, yet IT departments often find it difficult to accomplish. Do you have an internal engineering services department that handles maintenance and repairs to critical technologies? Does you datacenter have excess capacity? These are just two areas where organizations can find monetization opportunities but unfortunately, they are two areas that often fail miserably. Before launching any effort to monetize internal resources, be sure that senior management establishes priority protocols that allow those resources to respond to external client needs with the same level of urgency as internal requests. This will assure the success of most monetization efforts and a way to fund other IT initiatives without breaking the budget.
The budget process has become a necessary evil in today’s competitive businessclimate. Creative planning approaches can turn it from an obstacle, into an opportunity.