New research suggests that zero-based budgeting and thorough scenario planning are keys to an optimal IT budget.
David McCann, CFO.com | US
December 14, 2009
This is a good idea, but it is hard to implement. It requires that each part of the organization and initiative have a business case (cost justification) that can be compared to other business cases in the organization. Existing departments and initiatives often have a baseline of "maintenance level funding" that actually includes a-lot of change and enhancement built in. You can't just tell them overnight to justify that: they won't be able to, and even if they could, it would not likely be in a way that could be effectively compared with other initiatives. Consistency in how business cases are developed (i.e., how costs are defended) is key. Intangibles are the most problematic area. Consistency in business case methodology can't be achieved by mandating a standard: the organization must develop a capability for consistent and trustworthy business case development at all levels, and that takes time: it takes more than one funding cycle.
Posted by Clifford Berg | January 17, 2010 12:35 pm
IT budgeting completely depends on the type of company. For media where I work, its largely depends on Historical data. Yes, in bad time ZBB works very well in order to save cost but with minimum alternatives. Creating an alternative needs past data along with expertise for future.
Posted by om Prakash | December 16, 2009 12:01 am
I worked for a large construction company and when budget time came around, we would definitely just reuse last year's budget when it came to IT (and all the other departments). That might be the easiest way when times are good. I can see the potential of what could be saved when you start from scratch. You may still have to refer to the prior years, but getting an understanding of all the expenses can help give executives a sense of priority over the expenditures.
Posted by Cathy Iconis | December 14, 2009 03:51 pm© CFO Publishing Corporation 2009. All rights reserved.