Budgeting Blind: The Danger of Surprise IT Costs

Budgeting Blind: The Danger of Surprise IT Costs

January 21, 2021

Part of a series on Strategic IT Planning & Budgeting

We often get questions about IT budgeting.
Usually, the asker is looking for a quick answer, a magic bullet. Some sort of formula to predict their IT costs, or a price tag for some big upgrade like cloud migration services. And while there are some guidelines when it comes to lifecycle management and best practices for your hardware purchases, these are only pieces of a much larger picture.

Too often we see decision makers (on both the executive and IT teams) make guesses about IT costs without actually considering that bigger picture. For one example of this problem, and what it can tell you about your own decisions, read on.

Surprise needs will create surprise costs

A small IT team once reached out to ask us some standard budgeting advice. They’d been tasked to present a budget to their executive team for the upcoming year; their organization employed nearly 300 people, and had its share of specific IT needs. We asked, “what does your leadership want to accomplish in the next year?”

“We don’t know,” the IT team responded.

We were completely blown away. They had no idea where the organization was going or how it wanted to get there. Sure, they knew the organization’s day-to-day IT needs, and could keep things running as needed, but were in the dark about anything at a higher strategic level.

It was like telling someone to pack for “a journey” with no specifics. Will you need a snowsuit or a swimsuit? Hiking shoes? Your passport? Without any idea where you’re going, you can’t possibly fill that suitcase with everything you’ll need! And, just like the contents of a suitcase, you can’t easily adapt your budget halfway through your journey – at least, not without significant unplanned expenses.

Making decisions by default

Without a game plan, or even a target to hit, the IT team couldn’t possibly hope to budget effectively. They knew how much it would cost to “keep the lights on,” so to speak, but they had no idea what improvements the executive team would be expecting from them. They could guess, of course. And that’s exactly what many IT teams do.

Left to their own devices, IT teams will simply make the changes they believe are important, and will assume their decisions are trusted & supported by the executive team. This misalignment doesn't always cause problems – sometimes, maybe even most of the time, the team will guess correctly. But when they don’t guess right, the problems can be catastrophic.

Common misalignment sources

When this misalignment happens, it often comes from both sides. The executive team might assume that IT knows their strategic goals already, might not know how to ask IT questions, or might not consider the need to involve the IT team. The executive team might even treat IT as a static process, like a utility, and see a change to IT as no more complicated than adding light fixtures to a room: sure, it takes extra costs and specialty training to do, but it’s not like the electrician needs to know your organizational strategy.

On the IT team’s side, this misalignment often comes from a lack of awareness, or a desire for individuality. IT teams are accustomed to working in their own world, keeping complex machinery running and gradually improving it as they see fit. Some may assume that their role is exclusively support-focused, and that if the organization’s leadership wants to make any strategic changes, they’ll reach out. Others like being in their own world, and are afraid to provoke any changes, interference, or micromanagement.

These are some of the common sources of misalignment, but many more exist. Identifying them is the first step to solving a much deeper organizational challenge.

Finding the gap and bridging it

The greatest threat facing every interaction between executive and IT teams is their gulf of knowledge, context, and priorities. Many organizations experience such a gap: sometimes it’s hidden in the shadows; sometimes it’s plain as day, but those involved feel helpless to fix it because they don’t know how to start the conversation.

Without executive/IT alignment, inadequate budgets and surprise costs are practically inevitable. Organizations can limp along for a long time with an alignment gap – hidden or not – before it manifests symptoms. These symptoms are often relatively mild, but sometimes they can lead to disaster…including massive, unexpected costs. The only way to truly prevent these problems is to teach your executive team and your IT team to share information and priorities freely: no small task, but one that’s well worth undertaking.

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