This document summarizes an article that discusses how the global economic crisis will require improved financial management of IT budgets. It recommends that IT departments present their budgets focused on the value of the technology products and services they provide rather than just expenses. This involves allocating costs to specific products and services, detailing service level agreements, and standardizing systems to control costs. Doing so frames IT spending as an investment that delivers business value rather than just an expense.

1. Volume 2008 Fall/Winter Issue 4
In this Issue
Editor’s Musings,
by Roberta J. Fox . . . . . . . . 3
Canada’s Minority
Government and the
Telecom Industry,
Mark H. Goldberg . . . . . . . 4
Smart Spending During
Tough Economic Times,
Roberta J. Fox . . . . . . . . . . .5
Technology Delivers for
Family Owned Courier
Company,
Dean Smalley. . . . . . . . . . . 6
Slash or Invest in 2009?
Ken Cowman . . . . . . . . . . . 8
Cleantech and Wireless
– Creating Revolutions,
Dr. James Bowen . . . . . . . 11
A Green IT Approach
That is Good for
Business,
Susan Dineen . . . . . . . . . 13
Wireless Directions and
Wishes for 2009,
Michael Rozender . . . . . . 16
Ready to Revamp the IT
Financial Management
Process,
Ron Boulanger. . . . . . . . . 18
Tech Trends,
Bill Elliott . . . . . . . . . . . . 20
Ask the Analyst,
Stephen Lawson. . . . . . . . 22
Authoritative Journal for Canadian telecommunications, networking and contact centres
Readers have their say, $75.00 CDN – Single copy price
. . . . . . . . . . . . . . . . . . . . 22

2. Ready to Revamp
the IT Financial Management Process?
How the global credit crisis will drive improved fiscal responsibility
by Ron Boulanger
Managing your IT finances is challenging in the best of When competing against other departments for money,
times. Given the current world credit crisis and talk of it is necessary to sell the merits of IT. To do this, it is
doom ‘n gloom around the auto industry, fiscal prudent to present the IT budget as a value proposition
responsibility is about to take on a whole new meaning. rather than a necessary business expense. The traditional
way of budgeting presents IT as a cost centre. CIO’s
The pace of change we are witnessing with respect to must change the conversation to one of “value-add”.
market fluctuations will demand fast and nimble budget Otherwise be ready to make deep cuts to the budget
management. The primal urge to “flee” is often felt while taking on higher risks during uncertain times.
when budget cuts are mentioned. Unless you have the
good fortune of dedicated accountants keeping the While it is necessary to identify the expense elements
numbers straight, IT often falls short of managing mentioned earlier, we need to take the budget a level
budgets well. higher to that of IT Products and Services. It’s the
“guzinta” approach in its truest form. You know, “4
For those who aren’t “fast and nimble” budget managers, guzinta 8 two times”. In budgetary terms, salaries, and
read on! Given the world economy, it’s likely CIO’s will LAN/WAN costs “guzinta” the EMAIL, ERP, and HRIS
be asked to revisit and justify their budgets more than products. So for IT, the budget and cost allocation
once annually. transformation encompasses how to allocate the basic
cost elements to their products and services.
It will take time and resources to undertake such a
budget and cost allocation transformation. Here’s why
it’s worth doing.
1. IT supports products and services that are critical
to their business. When the hydro goes out
unexpectedly, what happens (aside from the fact it
gets darker)? People become idle. Even if they
possess a battery powered lamp, there is little they
can do without a computer. Technology has
become the central nervous system to all businesses
regardless of size. When the budget is presented in
product and services terms accompanied with
service level expectations, the CIO is changing the
conversation from “here’s IT’s budget” to “here’s
IT’s value contribution to our business.”
2. Add service levels and then you can have a
About 5 years ago, my employer at that time utilized a rational discussion about your budget.
traditional budget approach. It may sound familiar. Understanding service level requirements from your
Each IT manager was asked to produce a budget for internal business clients while measuring the service
their respective area, broken down by expense elements level delivery of IT are vital components to this
such as salaries, travel, training, supplies, consultants, etc. transformation. Remember Newton’s law, “For
Any variance greater than x% would require justification. every action there is an opposite and equal
Capital budgets were developed separately and supported reaction”? That applies to budget cuts as well.
with business cases. What is the implication of a 10% reduction in staff
on costs and service levels? If you are cutting into
Again, this is a common approach to budgeting in IT the bone you’d better know it and be able to defend
which often falls short under business scrutiny. Here’s against cuts that increase the risk of failure in the
why. field that adversely affect the business’s bottom line.
pg 18 www.foxgroup.ca Telecom Journal

3. 3. Encourage common systems by demonstrating 8. Be “fast and nimble” in response to budget cuts or
higher costs for one-off type systems. The key to managing business growth. Put systems and
managing budget creep is to standardize systems processes in place that allows IT to be responsive
and business processes. Without a doubt, your new when business challenges arise. As an enlightened
budget management system will demonstrate how and fiscally responsible leader, you will have at your
support and infrastructure costs are more cost disposal a products and services catalogue with
effective using a common systems approach budget and actual costs allocated by business unit
opposed to one-off approaches. Dollars and cents or department and business agreement as to service
type discussions just make more sense than level expectations. Through standardization of
emotional appeals for standardization. systems and business processes along with pertinent
benchmarking data, you will have positioned the
business to be able to take advantage of IT
outsourcing arrangements that benefit the business
in terms of service levels vs. cost. With all these
ducks in a row, the headaches formerly experienced
in these harrowing times will be greatly reduced!
Product and service oriented IT budgets are new to IT
but have been practiced for a long time in the core
business.
As IT costs become a more significant element within
4. Create a fairer method of allocating IT costs. the entire business budget, the CIO along with the rest
How precise IT costs are allocated within the of IT need to talk the language of business.
company may vary. Once products and services are
spoken versus salaries and travel costs, it becomes Everyone understands products, services, and service
easier to apply allocation rules. For example, use # levels. Few understand workstation seats, bandwidth,
employees, # workstations, # users, % sales, etc, as mirroring, and uptime.
criteria for cost allocation. Although some may
want to measure usage more precisely, I would So take the plunge and revamp your IT budget and cost
advise against it as these high maintenance allocation process! It’ll be a challenging project, a bit
approaches give the whole product and services outside IT’s comfort zone, but educational and
budget approach a bad rep. rewarding. Once in place, you’ll wonder how you
managed without it!
5. Identify all hidden IT costs and incorporate those
into your budget. Make a case to have all IT
expenditures under IT authority so as to make IT
the broker for all internal and external service
providers. It’s a painful exercise but you will be
thanked for doing it. Find all sources of IT
expenditures that are currently outside your budget Ron works as a consultant specializing in IT
and rein them in! Be warned that it will increase governance, planning and management.
your budget but you’ll be armed to talk to it while
possibly demonstrating how you will reduce these
extraneous costs.
6. Now you’re ready to benchmark. As your product Coming Events
and services will be more generically defined, you
will be able to benchmark. This exercise will better March 23-26, 2009 – ITPX Conference and Trade
arm the CIO with the case for change or to defend Show, including the former National Centrex Users
their budget. Be sure to undertake the benchmark Group – www.itpx.org
exercise with an unbiased and reputable consulting
firm otherwise your hard work may be dismissed by ITPX invites all VoIP/IP, Centrex, Telemanagement
business executives. System, IVR, Messaging, Wireless, and Convergence
Manufacturers, Service Providers, and Solution
7. Make IT more transparent from a cost and Providers to reach these decision makers and
showcase their services and solutions at the 2009
performance perspective. Transparency is so vital show. Enhance the exhibit experience by becoming
in managing internal business relationships and a presenter.
demonstrating solid leadership. There is no
downside to transparency. When you highlight a
problem, you’re recognized as a responsible leader. Visit www.itpx.org for the Call for Papers
When you demonstrate efficiency, you are rewarded application.
for your valuable contribution to the business.
Telecom Journal www.foxgroup.ca pg 19