Want to read Slashdot from your mobile device? Point it at m.slashdot.org and keep reading!

 


Forgot your password?
Close
typodupeerror
×
The Almighty Buck Technology

Establishing an IT Budget for a Small Business? 226

Posted by Cliff from the show-me-tha-money dept.
tirthas asks: "I am the Information Manager of a small (20 person) architecture firm and have recently been asked by my employer to prepare a technology spending budget. While I have a good handle on what I would like to spend vs. what I must spend, I am having some difficulty establishing a justifiable budgeting method. I have seen examples of 'per employee' methods and 'percentage of revenue' methods, but the dollars and percentages vary widely. What methods do you use to establish your departmental/company-wide budgets, what are your monetary amounts or percentages, and what successes or failures did you have in establishing your budgets?"
This discussion has been archived. No new comments can be posted.

Establishing an IT Budget for a Small Business? More

Establishing an IT Budget for a Small Business?

Comments Filter:

  • Keep it real (Score:5, Insightful)

    by winkydink ( 650484 ) * <sv.dude@gmail.com> on Monday August 08, 2005 @05:12PM (#13273442) Homepage Journal
    Might I suggest a method called Figuring Out What You Need and How Much It Will Cost and When You Will Need It? Especially for so small a firm. There is no magic formula that can be applied as many things will be specific to your company and the level of maturity in your IT infrastructure.

    Per employee and percentage of revenue are great metrics to meausre your technology spending against other companies, but I wouldn't use either of them as a budgeting tool.

    As for getting a budget approved, may I recommend presenting things in a menu-like manner along with an explanation of the benefits of making the investment and thre risks of not making the investment. ~

    • Re:Keep it real (Score:2, Insightful)

      by Anonymous Coward
      Make sure that the menu is listed in what you view to be priority order, and why priorities are as they are. (dependencies etc.)

      Management likes nothing more than changing priorities, and helping them understand the ramifications of their decisions is critical to working well with them in the future.

    • Re:Keep it real (Score:2, Informative)

      by mikelieman ( 35628 )
      And RIGHT NOW, start preparing for 06, 07, and 08 by listing in 08, a replacement for such things as the disk array which will be obsolete, Antivirus licenses, etc...

    • Re:Keep it real (Score:2, Informative)

      by Nos. ( 179609 )
      Don't gloss over things, but don't drown them in detail. Explain the current situation, benefits, problems, costs etc. Present a few options, status quo means this will probably happen. An additional x dollars means we could do this. An additional y means we could do this, etc. Reccommend one, that you honestly feel is the best investment of time and money, and don't be offended if they choose a different option.
      • Honestly, when you build a house, you don't go down to Home Depot and start pricing 2x4's and door knobs - you look at existing metrics (price per square foot for homes built in the past year in your specific region) as a pretty good barometer of what it is going to cost. It doesn't really matter in the big picture that Home Depot is having a sale on bathtubs - that doesn't change the overall cost of the house.

        Metrics vary by industry, and by how agressively a company is going to grow (and use tech to grow
      • You should have 3-5 budgets. You should have 1-2 lowball estimates of just bare minimum to scrape by. Say just the cost to effect repairs for the year and any licensing costs.

        Then 1-2 modest proposals of things you expect to keep things running well. Keep reasonable but don't underestimate your needs.

        Lastly, propose 1-2 "pie in the Sky" budgets. Things you like but don't really expect. Make sure to have sound reasoning for each but, don't skimp. You will likely get a few items on the high end budget.

        B

        • You should have 3-5 budgets. You should have 1-2 lowball estimates of just bare minimum to scrape by. Say just the cost to effect repairs for the year and any licensing costs.

          In my experience, unless you have some very good justification why the larger budgets should be approved, if you take this approach, the approval amount will be your lowest proposed budget.

          Furthermore, can you predict all the expenses that are likely? Are you sure you won't miss some?

          If you have a bare-bones budget, you will still

    • Re:Keep it real (Score:4, Funny)

      by a803redman ( 870583 ) on Monday August 08, 2005 @05:27PM (#13273604) Homepage
      Don't forget the "Oh God, that damn thing just died." section.
    • Those are pretty expensive for CAD programs. Also fit in OSS where it makes sense.
      Linux for servers, Firebird for browsers, Thunderbird for email, Open Office maybe.
      The only thing about Open Office is it does not exchange complex spreadsheets and or PowerPoint files well yet.
      I have yet to see an open source cad system that is as useful as Autocad, Solidworks, or PRO/E.
      I would stick with Closed Source accounting unless you really like accounting software or you can find a vendor of open source accounting sof

    • Re:Keep it real (Score:3, Insightful)

      by darkonc ( 47285 )
      Bingo --
      Different departments are going to have different needs. Accounts Recievable, for example can probably get away with a P2-200 if you want to make them feel ignored. marketing might use a Mac, or two, and the engineers are probably going to be most productive with reasonably up-to-date boxes (give the hand-me-downs to A-R with new disk drives).

      The executives and upper management, of course, will need the latest and greatest game boxes. Don't give them X-Boxes. It'd be just too obvious.

    • Keep It Real... Simple (Score:5, Informative)

      by The-Bus ( 138060 ) on Monday August 08, 2005 @05:49PM (#13273778)
      I think the main idea here is to get an idea of what the goal is of the employer. Is it to try and predict profitability? Are they selling or divesting the company in any way? Do they need to allocate some bonus funds they just found? Is it for tax reasons?

      I imagine if you're in charge of administering most of the daily tasks (backup, network maintenance, upgrades), there is no labor cost. This makes it very easy for you.

      I would put something together where you talk about the existing infrastructure, and maybe some proposed changes. Rank these changes in priority from "Low" (we can live without them but they MIGHT provide efficiencies) to "Medium" (realistically these will be needed, provide a good benefit for the investment) to "Musts" (these have to be done in the next 12 months otherwise the business will not function as it does today).

      For example, "Low" might be buying larger, better displays for the office and a plasma TV for the client presentation room. "Medium" might be to buy larger, better displays for some of the drafting people, if the current ones are already a bit old or unreliable. "Musts" might be the monthly costs of internet/voice service (make sure they're not double- or triple-counting anything) or replacing a monitor that you KNOW will be gone within three months.

      Also, make an approximate tally of the current value of items in the office, as far as IT is concerned. What if a file server went down? How much is the replacement? How much would a new bells-and-whistles replacement be?

      I would probably draft up a "recommended" budget:


      Recommended Budget: Medium
      1. Replace six machines in back office. Cost $9000.
      2. Upgrade network to gigabit ethernet + wireless. Cost $1500.
      3. Acquire new scanner and printer for front office. Cost $500


      Then, above and beyond that, ESTIMATE the "Oh, crap" budget, for example:

      Assuming 6-8% of all current equipment will be destroyed/lost/not working, this will cost $6,000 - 8,000.


      Clearly spell out that the first part is "in your control" and the other part is BEYOND your control. You may find that the "in control" budget is $11,000, while the "beyond control" budget is $25,000. Or the "in control" budget is $35,000 and the "beyond control" budget is only $7,000. Approach each of these scenarios differently.

      Once this is all done, write a half-page summary on the front page. One paragraph explaining the "in control" budget and a realistic range, plus the benefits. Then a second paragraph with the "Oh, crap" stuff.

      I'm making the assumption that your employer wants to know the following:

      • What do I need to spend to keep this company running?
      • What do I need to spend to make us more competitive?
      • If I upped my IT investment by $20,000, what could I get? (all the "Low Priority" stuff)
      • Do I need this guy on my staff?


      Succesfully and accurately answering the first three questions will make the fourth one easy.

    • Re:Keep it real (Score:3, Insightful)

      by nightsweat ( 604367 )
      And then, for every layer of "hostile" management between you and the CFO, add 20% to your budget. Each layer likes to cut a good percentage off the top.

      With any luck you'll still come in a little under budget and can trumpet that accomplishment at review time.

    • Re:Keep it real (Score:5, Interesting)

      by Nintendork ( 411169 ) on Monday August 08, 2005 @06:51PM (#13274267) Homepage
      I'm in a small business that has gone from 40 full time employees to about 150 in the last two years. My boss, the Director of IT started just a few months before me. Prior to him, there was no centralized IT dept. What the parent poster said is 100% true, but I'd like to add some equally important advice.

      You need to itemize your budget into categories such as "Software purchases and maintenance", "Hardware", "Supplies", "Communications", "Training", and so on. Your first time making the budget, this will be an extremely tough process. Rely on reviewing the past years' spending and think of those purchases have not been made that should have (Think backup power, corporate antivirus solution, license audit, backup solution, workstation and server refreshes). This list can be quite long, depending on the company. Make sure you get buy off on this list by talking to all those involved and getting their approval in writing. As an example, make sure everyone is agreeing on the same software products so you don't get blindsided half way into the year by some $10,000 package that you weren't expecting another manager would require. You'll be held accountable for your department's spending compared to what was budgeted, so you absolutely MUST aim high on the estimated cost of everything, even more so on items that are tough to pinpoint the cost on. If there's something that has a fluctuating cost, look at a several year history to recognize growth and aim for the highest cost month at the current growth rate.

      Make your proposal as simplified and easy to understand as possible. Leave out the techie stuff and tell him what he is going to get out of each item. For items that you know will be a tough sell, bring statistics and case studies of other, big name companies that use said item. When your boss sits down with you to review your proposal, you're going to have to fight for your budget. If he/she wants a more granular view into the proposal, give it to him. If he comments that certain items seem a little high, tell him that you put it a little high to give cushion and provide breathing room for unseen costs. During this process, fight for the things that are most important and give him victories on the smaller things. This way, you get the money for the things that matter most and if the boss comes to you later asking for something not so important, you can refer to the budget and ask what he wants bumped. If he backs out and drops his ad-hoc request, save that as ammo for the next budget review in case you need it. If your boss wants to give you an unreasonably low amount, you must set expectations and clarify the items that will have to be bumped from the review. If he's trying to give you your own budget, remind him that you're the one responsible for the budget and that responsibility cannot be given without also giving authority. Most people understand this line of reasoning and those that don't shouldn't be running a business and you're better off finding an employer that you can grow under. There are plenty of companies out there that would hire an experienced individual that puts a real effort into their job and stands behind what they bring to the company.

      When the dust settles, there may be important items that got bumped due to the high costs in catching up to where your department should be at. Do NOT try and squeeze money out of other items to make room for those items that are being bumped early in the year. If crap hits the fan due to that item not being approved in the budget, it's not your fault and your boss made the decision on his own knowing the possible consequences as you explained them. On the other hand, if you get to Q3 and have a little extra money, you'll be in a much better position to purchase that item as a bonus and sleep comfortably knowing that you'll still make budget. Keep in mind though that you'll rarely find yourself getting more breathing room on your budget as the year progresses, so don't count on this happening.

      This process may at

    • Return On Investment (Score:3, Interesting)

      by DragonHawk ( 21256 )
      Here's a tip that often gets lost on people: Everything in business spending -- and by that I mean EVERYTHING IN BUSINESS SPENDING -- comes down to one thing: Return On Investment. How much do you get back for what you spend, and how fast?

      Of course, quantifing things like worker productivity, morale, and community image can be hard, but you can make a good go at it. Look at how much time people spend waiting for the computer, bitching about the computer, or otherwise Not Getting Stuff Done Because Of The

  • Can't give you the entire budget (Score:3, Funny)

    by lucabrasi999 ( 585141 ) on Monday August 08, 2005 @05:13PM (#13273460) Journal

    First, create a "consulting" line item in your budget.

    Second, put $20 million in the consulting budget for next year.

    Third, hire me as your consultant for one year.

    Fourth, at the end of that year, I'll tell you how to budget your IT operations.

  • is what you should shoot for if you listen to idiots like Mr. Mott. HP is in for a world of hurt. They already cut 14500 jobs. If you are making money and employees are happy and you spend 50% of your gross on IT who gives a crap?

  • Seek assistance (Score:5, Informative)

    by XorNand ( 517466 ) * on Monday August 08, 2005 @05:14PM (#13273471)
    Wow... this is a whole can of worms. You're not going to get an appropriate answer on semi-anonymous web forum. I operate my own technology consulting firm who specializes (coincidently enough) in professional service firms such as yours. I earn my living, in part, by answering these types of questions.

    I'll need to know the current technological state of your company. How close to capacity is your IT dept running, both in manpower and equipment/services? What are your company's growth expecations over the next two years? 5-10 years? In what role does your company see the IT department, cost center or profit center? In the case of the former, how might we turn that around? How does your utilization of technology come to others in your industry? Etc, etc...

    Take the sound bites that you're going to get here with a grain of salt. You're going to need answers that are specific to your business itself. I know it's probably not what you want to hear, but you really should call in some outside help so you can learn how to do it right. Patching together piecemeal advice might cost you your job in the end.

    • Re:Seek assistance (Score:2, Funny)

      by Anonymous Coward
      > Take the sound bites that you're going to get here with a grain of salt.

      We can provide salt that has "five nines" availability with N+1 redundant grains. We have been a Sodium Chloride E-Solution provider and integrator since 1996. We also provide consulting to smooth your transition from obsolete grains using our trademarked "iDesalinization" method. Call us today!
  • I bet now you're glad you took all those Accounting classes during your studies in IT/Architecture! :)
  • My budget is what ever I find in the couch cushions in the loby of hte local hotel.

    Or is that too small a business?

  • Brute force (Score:3, Interesting)

    by dtfinch ( 661405 ) * on Monday August 08, 2005 @05:19PM (#13273509) Journal
    Make a spreadsheet of all expected/likely purchases for the next year. Give rough min and max ranges for quantity and price for each line item. Include things like new systems, servers, upgrades, replacements, software licensing, network hardware, the unexpected, etc. Try to keep IT wages and contract work seperate from hardware/licensing costs. Then use the spreadsheet totals to figure out a good range of expected costs for the year.

  • Chicken Blood budget (Score:3, Funny)

    by bobcat7677 ( 561727 ) on Monday August 08, 2005 @05:20PM (#13273542) Homepage
    Whatever you do, don't forget to budget for ample supplies of chicken blood and other black magic staples. You know you will need it when the boss asks for those apps and hardware that magically do things that aren't possible in the natural realm.
    • Dude - everyone knows that you need fresh chicken blood to get maximum effect!
    • Whatever you do, don't forget to budget for ample supplies of chicken blood and other black magic staples. You know you will need it when the boss asks for those apps and hardware that magically do things that aren't possible in the natural realm.

      You mean the ones which Microsoft says will be out 'real soon now' or 'in the next major release of Windows'?

      You'll also need some penguin blood with that black magic if you think you're going to use OSS and/or GNU/Linux without knowing anything but Windows. Well,
      • You'll also need some penguin blood with that black magic if you think you're going to use OSS and/or GNU/Linux without knowing anything but Windows.

        This is just FUD that Microsoft trots out whenever they want the TCO numbers to come out favoring Windows! Everyone knows that penguin blood is much more expensive than chicken blood. Of course, what they won't tell you is that chicken blood works just fine for Linux servers, too. Don't believe me? Try it.

        Of course, Linux admins still cost more than Window

  • This isn't an answer but once you have some numbers to work with it may be helpful to know that Gartner group studies show average IT outlay to be around $2000 per employee per year.
          Granted, this does include everything from the electricity cost to paying the janitor to dust the monitor once a week but the fact remains that the bulk of that $2k is still hardware/software/admin costs. (I think $1700? Anybody have a link?)

  • Budget? What Budget? (Score:5, Insightful)

    by Wandering Wombat ( 531833 ) <mightyjalapenoNO@SPAMgmail.com> on Monday August 08, 2005 @05:22PM (#13273552) Homepage Journal
    At my company (14 employees-ish) the budgest for IT is just "Find out what we need, buy it, and give us the reciepts". Seriously. Our IT guy just does what he has to, and justifies it when asked about it. If he can't justify it, he either gets limits on what he can spend next month, or it gets returned for something cheaper. With small companies with extremely variable budgets (months our company actually get PAID result in much higher IT purchases), it's best to take it one month at a time, and document reasons for EVERYTHING!
    • Same here for me. 10 people, 3 are remote users, so when it comes to a budget, it basically don't go nuts. I basically have this company in maintaince mode after spending about $20,000 over a period of 8 months. All were for projects that made their computers systems better, quicker and more redundant without goving over board on each one. Now I only have to spend money when something happens, I can just go out and buy it and replace whatever broke, and this is how it will be for many years. The questio
    • There are foreseeable needs, and there are unforeseeable needs. A good organization should be able to accurately predict what costs it will incur in the next few months or years, and be flexible enough to respond to unforeseen expenses.

      Not knowing where the money will come from shouldn't stop one from knowing ahead of time what will be needed and budgeting for it. If cash is a big variable, then your budget has to be more flexible and perhaps conservative. I don't understand how your management can tell h

  • My normal budget report method is one of the following:

    Method #1: "Give me $xxx by this date, or our cash registers will go offline until you do."

    Method #2: "Give me $yyy by this date, or I'll cry like a little sissy girl until you do."

    Unfortunately, I've never had the opportunity to use Method #3: "Give me $x,xxx,xxx or you won't be able to download any more porn."

    Though I know someone who has.

  • Are you the guy they hired to do CAD? (Score:3, Insightful)

    by RealAlaskan ( 576404 ) on Monday August 08, 2005 @05:25PM (#13273587) Homepage Journal
    Let me see: ``I am the Information Manager of a small (20 person) architecture firm ...''. So that's 17 draftsmen and architects, a receptionist, an office manager, and you? Or are you the most CAD-capable of the draftsmen?

    That's an important question, because if they've actually hired you to be ``Information Manager'', they're going to have entirely different expectations than if they've hired you to be a draftsman and dumped this extra responsibility on you.

    If you're a draftsman with an extra burden, I recommend that you look for the thing(s) which will let you solve a few small problems, give you no new problems, and not waste any of your time on adminstration. Find the price tag, and you have your budget. If the number is too small, new machines all around (or, just for the partners and their favorites, and let their old machines trickle down). You can't afford to neglect the one part of your job they understand (the drafting), so don't let yourself get trapped in system administration!

    If you were hired to be a full time IT manager, why are you asking us for advice? Figure out what they need, tell them what it costs and how it will save costs and increase revenues. You do know how to do that, right?

    • hey, maybe the guy showed them how to use a spreadsheet and plugged in a printer so now he is now the Windows expert. Because he could click on a few buttons, he's now getting loaded with things he's totally unqualified to do but he doesn't want to let them know he's clueless. I've seen this happen over and over again.

      next thing you know, he's asking /. about getting an MCSE cert the quickest and cheapest way so that he can embed Microsofts crappy software further into the system and balloon his IT budget.

      o

  • Screw the methodologies, per capita expendature, that's generated after the fact.

    You said you already have an idea of what you must spend. Create an itemized list into a spreadsheet. This is the mininum operational cost, keep this list secret. Then take an itemized list of what you want to spend, put that into another spreadsheet. Your realistic budget will probably be somewhere between the two.

  • Keep it real (Score:2, Interesting)

    by shane2uunet ( 705294 )
    I too work for a small company that does not pull a lot of profits. The cash flow is very seasonal and the budget is kind of mystical.

    What we do is just sit down and assess who needs new computers that year. How much you spent last year on incidentals (CD's, cables, RAM, etc).

    A rough guess is to add 20% to what you have down on paper. Of course you can only make an accurate budget knowing your past spending habits and what things are on the horizon.

    One thing of note. I worked for a big hospital a few ye
  • Ask all 20 people the following four questions:
    What is the value of the projects that flow through your computer system?
    What is the cost of replacing all of your data, while on deadline for a project?
    What could a total system failure cost the company, if it happened at the worst possible moment?
    Based on your answers to the first three questions, would you mind if we spend 4% of the potential losses on a reliable computer system?

  • I'm in the same type of position and industry... (Score:3, Insightful)

    by Camarones ( 23191 ) on Monday August 08, 2005 @05:29PM (#13273622) Homepage
    I hate to say it, but a lot of your spending will depend on your clients. If your clients run Autodesk CAD software, then so should you, and that will make a huge dent in your bottom line. Our clients stagnated on AutoCAD 2000 for years, then just this month decided (and these are fortune-500 retailers, mind you) "oh, lets upgrade to AutoCAD 2006, so should YOU"...

    I'm the sole IT person in a 50-person architecture/construction management firm. Our spending varies year-to-year but there are a certain amount of annual expenditures. Things like antivirus software (both at the server and desktop level, CAD upgrades (we stagger our and are getting onto Autodesk subscription... it hurts in the beginning but pays off after a couple of years).

    I do my best to save on the software side and apply the savings to better hardware. By this I don't mean go out and pirate what you can't afford, I mean look for OSS alternatives to things you may think are a must-buy. I run sendmail with Mailscanner/spamassassin on FreeBSD and linux, instead of Exchange. I run supplemental Samba servers on quality HP servers. I do run a windows domain, because its just easier for me to manage than a Samba-based domain. Believe or not, MS stuff just works in my organization. Our industry-specific accounting software is windows-only also, so we're kind of stuck there.

    Like someone before said, you need to take into account your corporate growth goals and decide if you want to invest in a lot of good hardware that should last a long time, or buy cheap initially and replace things when needed.
    • If your clients run Autodesk CAD software, then so should you, and that will make a huge dent in your bottom line. Our clients stagnated on AutoCAD 2000 for years, then just this month decided (and these are fortune-500 retailers, mind you) "oh, lets upgrade to AutoCAD 2006, so should YOU"...

      Their reasoning behind this was pretty sound--Autodesk EOLed acad2000 based products in january of this year. That means no support and (worse yet from a financial standpoint) acad2000 products no longer qualify for up

  • Work out what your business does first (Score:3, Interesting)

    by AccUser ( 191555 ) <mhg.taose@co@uk> on Monday August 08, 2005 @05:29PM (#13273624) Homepage
    You need to understand what your business does firts... what applications does it use, what sort of workflows, types of documents produced, versioning requirements, etc. and then look at the system you have and see where the holes are.

    I have done this for myself (started back in 01/2003) and also for clients (as a side) and to be honest, for a small business like you talk about, there is not really an IT budget. The point is to spend only exactly what you need to do the job, and if additional benefits can be realised for no extra cash, then that is a bonus.

  • Dont Forget (Score:3, Insightful)

    by polyp2000 ( 444682 ) on Monday August 08, 2005 @05:29PM (#13273626) Homepage Journal
    If you are going to be purchasing any proprietary lock-in software. To budget in for the enevitable operating system upgrades and office upgrades. Then of course there are the AV software subscriptions and so forth.

    Do careful planning and always have a back-up plan. What happens if the vendor you bought software product X from goes bust - what happens to your support?
    • How this is a troll, I have no idea. It is always important to budget for software support and the inevitable upgrades, whether proprietary or open source software. In business, there is no such thing as free software, since a paid employee must install and support it.

  • Business Strategy (Score:5, Insightful)

    by dlefavor ( 725930 ) on Monday August 08, 2005 @05:29PM (#13273627)
    What's the business strategy of the firm and how can technology best support it?

    Don't stop with PC's and applications. Include phones, Internet access, printers, faxes, document repositories, paper, toner, CD's, you name it. If the business strategy is best supported by quill pens and parchment paper, though, don't be afraid to go low-tech.

    The partners probably have an idea of how much they want to spend on you, your team, and what you and your team do. Find out.

    Do not trifle with that step. If they think they can afford $30,000 a year on technology and you present a $300,000 budget, the next sound you hear will be the axe falling.

    Never forget that your firm is in the business of architecting things. Having cool computers with the latest applications that do not contribute directly and measurably to the architecting of things is deadly.

    • He also needs to factor in specialty tools based on if the company is high end or low/middle end architecture. If high end, a stereo lith machine or 3D scanner might be in the budget. Wow'ing high end clients with high end models can help justify the high end bills they'll get. If middle/low end, color laserjet, inkjets, or scanners might be all you get outside the standard desktop and server systems.

      LoB
  • It sounds like you're getting ready to go overboard with it. In a company that size, what you really need to do is make a big list:

    1. Write down the sum of your IT department salaries.
    2. Write down all of the hardware upgrades/purchases you expect to have in the next year.
    3. Write down all the software purchases and licenses you expect to get in the next year.
    4. Write down all the service contracts you currently pay for.
    5. Write down all of the fun stuff you'd like to purchase in the next year (VOIP,

  • Best method (Score:5, Insightful)

    by Todd Knarr ( 15451 ) on Monday August 08, 2005 @05:33PM (#13273652) Homepage

    First, ignore all the per-capita methods. They won't work.

    Now, take your lists of what you need to spend and what you want to spend. Lay out the items, give each one a priority ranging from "must have" to "would be nice". Provide a justification for each one and for the priority you gave it. Give all justifications, not just the best one, with examples from reality (eg. the justification for the anti-virus software might make reference to actual virus infestations in the company in the previous year and how much they cost in money, time and resources). Be sure to account for recurring costs in future years (eg. the service contracts on equipment, anti-virus update services, etc.).

    Once you've got your list, sit down with the Finance guys and figure out how far down the list the business can afford to go.

    Realistic budgets aren't based on per-capita expenditures or percentages of revenues or profits, they're based on what the business actually needs to spend to stay in business.

  • Ask the controller for the standard (Score:3, Insightful)

    by magarity ( 164372 ) on Monday August 08, 2005 @05:37PM (#13273685)
    First, ask the controller or CFO what the company uses for a standard method, such as internal rate of return or payback period. You don't want to walk into a presentation with numbers using method X when the management thinks in terms of method Y.
    • To further clarify: view everything as a project. From maintaining an existing server to buying a new one to being help desk guy, budget them as projects. Each activity can then be individually justified and dealt with in terms of balancing with each other.
  • Buy all desktops as Mini-Macs if you are going to or have to use MS Office. It'll save you the trouble of Windows licensing, admin issues (OS X has a pretty sweet lock down features and remote admin as well) and can generally work without you have to bother futzing around with configurations.

    Unless of course you need to connect to a Novell Server or what to use Exchange (well there is always Entourage, but it's not that good), but then we have to ask why are you using both of those since most small business
    • Unless of course you need to connect to a Novell Server or what to use Exchange (well there is always Entourage, but it's not that good), but then we have to ask why are you using both of those since most small businesses don't need 50 login licenses...

      First, there is no such thing as a "Novell Server" as a specific product. You can buy a Novell Netware OS, a Novell SUSE Linux variant, or Open Enterprise Server (with either a Netware kernel or a Linux kernel). Second, Novell sell per seat licenses in ad

      • Sorry, I meant if the server reuqires a Novell Client Login. There is an OS X version by a 3rd party, but no support by Novell or Apple. If your server doesn't require a Novell Login Client (even it is an Netware backend) then OS X will have no issues with it out of the box.
  • It is absolutely essential to find out what your users and their needs are first. If you talk to a few of them, you'll get an idea of what is necessary vs. fluff. But each persons needs will vary, and it's important not to lose sight of the fact that a computer is simply a tool to get a job done.

  • Instant Strategy (Score:5, Insightful)

    by Clansman ( 6514 ) on Monday August 08, 2005 @05:39PM (#13273704)
    Here's a 9 point, back of an envelope plan which sums up what the big consulting firms will tell you (in less words).

    1. Review the Business Plan. What does it tell you? You expanding? You going all e-business? What? Wishes as well as reality.

    2. What about trends in the architecture world? Trends in technology? Cheap storage, cheap bandwidth etc?

    --> Try to work out what capabilities are suggested by all of this. eg - if your firm says they want to go e-billing then, hey, thats a capability. Show these to your firm and get them to rank them, score them whatever.

    3. You haven't just started up, I suppose, so how does your current IT match up? Do a big list of capabilities you have identified and assess each one against your current apps/functionality.

    4. What would a future IT system look like if it were to deliver all these capabilities? How could you leverage some of the technology trends you identified in to creating growth or profit? (invoices by pdf = save on printing and mailing etc. Recruit new staff just via the web = savings etc )

    5. Can you decribe an optimal IT applications and technology architecture yet? Would that be an open accessable database feeding billing, web portal, collaboration, etc? Web based? Accesible in the move, laptops etc?

    6. Now do a gap analysis of what you have versus what you want. Describe how you could move between those two states. Ie projects, dependencies etc - migrate this database, use a temporary TS server, then move to app x etc etc. remember culture (saving local vs contributing centrally - loss of power for the individual) - have a plan for selling culture changes too.

    7. How could you pay for this - what levels of investment would it take? How will the changes be paced - what happens this year and what next. Will there be an investment phase of a few years then a leveling out. Talk business cases here - ROI.

    8. Map the risks and critical success factors. Map your communications plan for the changes.

    9. Present. You now know exactly what you want, why you want it and in terms that the rest of your staff team will understand - they nedd the capabilities not the software itself. Easy sell really.

    We go though this every few years and it is an effective enough methodology.

  • (Support staff salaries) + (# of PCs hardware cost) + ($699.00 per user to SCO) = your budget.

  • This shows half of ITs problem. (Score:3, Informative)

    by Soko ( 17987 ) on Monday August 08, 2005 @05:43PM (#13273732) Homepage
    Friend, I'll give you credit for actually asking the question. It's a smart person who admits when they don't have the info they need, and tries to find out the answer instead of winging it. But, you're going about the solution all wrong. Proper IT support is not just about numbers - there's soooo much more.

    First, you need to get a handle on what you're employer actually expects out of it's information systems. Some firms want a glorified typewriter, some want it to do most everything. Some can't stand spending a dime on a machine, others only want the latest and greatest. Guaging the culture of an organisation is paramount.

    Then there's risk. This is, IMHO, the biggest factor in actual budgeting. How much risk to the companies bottom line will any expendatures entail? How much risk is involved with doing nothing? How much risk is involved in your compeditors advancing further in IT efficiencies? You need to show that what you intend to spend will protect current operations, or there won't be a budget for anything, let alone IT. As well, if you can show that there's significant risk in not spending a certain amount, most CxO types will approve what you're asking for.

    Then you can get into the numbers, and justify your expendetures with ROI.

    OK, the problem? My experience lately has been that professionalism is sorely lacking in a lot of IT departments. I've heard people lament "They're driving the company into the ground anyway - why should I care?", or justify an over priced solution on what other departments get, while bitching about how under appreciated the IT department is. Your department is under appreciated because it isn't communicating properly with the people you serve. It's that simple.

    We techies tend to look down on business users (they are just lusers, after all), but they're the people who drive the ship. How they're driving it should not matter one whit to you effectively doing your job. Hell, maybe some information that your systems provide will turn into a cluebat and wake up a sleeping bridge. You need to think a bit like them in order to effecitvely communicate what you're trying to do and why. You need to use thier terms and jargon, even the (YECH) buzzwords. This seems to be anethemia to a significant portion of the Slashdot crowd.

    A professional, when he accepts a job, will do what's right for his customer within his area of expertise, no matter his own personal opinion on the customer or the customers direction.

    Soko
  • Slashdot should not allow these posts. They are embarrassing for the rest of us.

    I'm sorry, but there is no way anyone can help here without the usual "more info" help. I don't know how much money your firm has to begin with, I don't know how much, if any need there is for an IT department.

    So, I'll give generic advice to a generic question:

    When in doubt, ask for much more than they will be willing to spend, and odds are you will get more $$$ than asking for what you really need. Basic psychology.

  • Seriously? (Score:4, Insightful)

    by BlightThePower ( 663950 ) on Monday August 08, 2005 @05:48PM (#13273769)
    Your firm must be big enough to have an accountant, if so, time table a long meeting with him/her/it and thrash it out with them. You might as well, it'll only end up on their desk again anyway. Come up with a range of options that meet the requirements and the account will help you put figures on things, including your assessment of the liabilities in el cheapo solutions. Personally, I've had a good success level and good experiences with turning the "gatekeepers" into collaborators that way.
  • if you're new to the company, get the previous 3 years IT expenses, including outside services, software, hardware, etc. From that, you should be able to determine the baseline for your budget. Now, figure out what you want to do to IMPROVE the department over the next 5 years, and make sure you've discussed this with other department heads since they WILL be involved.

    You're going to have a difficult time justifying someone elses budget if you just go by what "others" say and do. And for goodness sake, incl
  • I've done IT budgeting for a couple of decades in several different firms, ranging in size from 30 to about 5000 employees, and I think using these percentage or $/employee formulas is an excellent way to perform a surgical strike on your foot. Here's how I approach it, in broad terms:
    1. FIGURE OUT WHAT YOU SPEND MONEY FOR
      You can use a previous budget, or actual expenditure figures, plus a "wish list" of new stuff. The point is just to make sure you have a complete list of the things you're going to need

  • Here's what I do (Score:5, Insightful)

    by jtosburn ( 63943 ) on Monday August 08, 2005 @06:01PM (#13273893)
    Hi-

    I'm the sysadmin at a ~25 person architecture firm, and an architect, too.

    What I do for budgetting is to start with an inventory of every piece of equipment we own. Then I assign an approximate lifespan to each thing, based on experience. Couple that with when each item was purchased, and replacement times and potential budgetting scenarios start to emerge. There are a couple of policies I try to wedge in there to steer purchases, such as I like to put the new machines in front of the heaviest, most demanding users, which for us is the more billable staff. I'm forunate in that I have management's backing, so that there's never any whining from project managers when an intern gets a kick ass machine, and the PM gets the hand-me-down. By keeping the machines coming in, I can keep everyone pretty happy. In addition, whenever possible, I try to upgrade our software versions either every two or three years, on everything except the Microsoft hegemony, which I only upgrade through churn of new workstations.

    Around the fairly regular annual purchases, I then stategize the big ticket items: new plotter, Autocad updates, expanding licenses of Photoshop/InDesign, implementation of a new accoutning system, or what-have-you. This helps even out the costs from year to year. None of it's rocket science; you just have to put your head into it and figure out what it would cost to maintain your company's current level of technical prowess (x machines per year, etc), and that what it would cost to further develop the skillsets (by getting new software, and doing more training).

    FWIW, we spend ~$45k per year, which works out to be ~2.5 - 3.5 % of revenue. My bosses have never gone for a straight percentage method, but it's my preference, since it automatically adjusts itself for good times and bad. Instead, I develop a budget, they either say yes to the whole thing, or specifically exclude one or more items. Then I establish the priorities and give them an idea of at what points in the year I'd like to spend money. They coordinate that with the company's cash flow, and if the year turns sour, I just get reigned in on my spending.

    Sorry if I'm rambling too much. OTOH, if you want more, post a response, and I'll give you my email address.

    Joel
    • I'm the sysadmin at a ~25 person architecture firm, and an architect, too.
      ...
      FWIW, we spend ~$45k per year, which works out to be ~2.5 - 3.5 % of revenue.

      That's equivalently about $2K/person/year for the complete IT infrastructure, which is another way to derive a bottom line for purposes of cost management. Both ways are useful, but for different reasons.

      If you doubled the number of employees, a rough prediction would be to double this cost as well. You'd get some economies of scale, but you mig

      • Actually, cost of new employee is going to be about triple the annual cost per employee; you have to buy those ACAD licenses and the machines.

        The other big problem is plotters. There is a huge range of what companies have, but if you have 12 architects/designers/CAD people the plotting equation is tricky. We lease and bill back plots to projects. Without the kickbacks it would be a stupid move, but it moves the money between projects and as overhead.

        I'm in an engineering shop (M&E), and I would put
    • This is a great response.

      General IT budgets average around ~3% of revenue. Some companies are higher and some are lower, but its a good ball park.

      ---

      I am an IT manager with a background in architecture. I have done budgets ranging from several million up to 50M.

      I previously worked in various architecture and design firms, large and small:

      Lease your equipment.

      Here is why:

      Your a 20 person firm and you may have a dual role as CAD manager/drafter/arch and IT guy. CAD programs (like autocad) do progress (albeit
  • Both methods you mentioned are bad ideas. Use them as metrics of the effectiveness of your IT, not a justification of how much to spend.

    Figure out WHAT THE WORKERS NEED, and how to give it to them. Then figure out how much it costs in a variety of scenarios. Use the one that is most futureproof, and multiply the figure by 1.33 and use that as your budget request. (the 1.33 is because nothing works right the first time)

  • responses by IT insiders who really have no understanding of the business picture.

    You want responses from people who understand the small professional services firm.

    My experience as an IT fence sitter in a small professional service firm is that if you were to recommend it, as the expert in the firm, the principals will be willing to pay for it.

    I would simply make a list of your expected needs and spread it out over the best time periods to implement the changes.

    If your owners are "cheap," don't try and be
  • The trouble with a small group is that the standard deviation is too large.

    In other words, to paraphrase an earlier poster, you can use "Cost per square foot" for building a home, and the larger the home, the more accurate the average.

    But if you are specifically building, say, a bathroom, you can't use that metric accurately.

    The best way to do it is, as others have suggested, "lay out what you need to get" and factor in your assumptions (replacement machines for old desktops, replacement printers, etc.).

    Don
  • I am not sure what level of answer you want here, but it seems from this 'percentage of revenue' business that you could use some advice at the highest level. (My apologies if I came to the wrong conclusions based on the short snippet that was on the slashdot front page.)

    Your company should spend on whatever will give it the highest return. If that happens to be IT, then spend on IT. If there is a better place to put the money, put it there.

    You talk about trying to find a justifiable method. The best justif
  • Try a template, for example, in Canada, the Business Develpment Bank [www.bdc.ca] provides templates for starting mid sized businesses.

    If you're on foreign turf and don't know your way around then go with what generally works for others. There are usually government agencies that provide templates.

    If you're developing a budget then remember to develop it with an eye to your banker. A fubar budget cobbled together by a non accountant is not going to please your banker, your tax accountant, the tax dept...etc.

  • We too are a smallish company (75 employees) and when presenting options to our senior management team for review and approval I like to give them a good, better, best selection.

    Good is the bare minimum, it's a throw away solution intended to just get us by while spending the minimum amount of money to get the job done.

    Better is a solution that may not be "best-of-breed", but will scale and won't be trashed as soon as our needs/requirements change. It's what I always shoot for when asking for budget kn

  • ... and I can say this (happily) because I don't have nearly the budgetary control or responsibility in this job that I used to in the past ... My dad does IT audits for AMEX, and I've also learned a lot from him.

    Per-user costing is not a consistent indicator of what the costs really are. For example, your developers, while they'll require fast workstations and any number of different productivity tools (IDEs, merge tools, repositories, other 3rd party products, etc.), won't be actually taxing the infrast

  • First an observation: drafter's their tech needs are generally higher per seat than other employee types (exception: CNC users).

    Some things you might consider:
    -- All the good advice above about inventory.
    -- Depreciation schedules you can live with. I am amazed how many accountants still think computers are good for 5 years.
    -- Consider leasing software. Many will disagree with me for very valid reasons. Software leasing (most are 12 or 24 months) work well for our business. They give me software num

  • Hello, Tirthas. Interesting question, thank you for asking Slashdot! I should say I am not really qualified to answer your question because I have not ever managed an IT budget personally. However, products like AutoCAD LT 2006 are licenced on a per-seat basis http://www.novatech.co.uk/novatech/specpage.html? A UT-118961 [novatech.co.uk] I believe. If there are 20 members of staff I expect your employer plans to expand. A per-seat calculation could help the business owner decide whether to take on another member of staff by

  • Hardware choices should not be made totally by IT (Score:3, Insightful)

    by pres ( 34668 ) * on Monday August 08, 2005 @07:28PM (#13274578)
    The other thing to keep in mind is that you need "thoughtful" input on what you are buying. Its one things to decide if laptops or desktops would be more cost effective IT wise, its another to ask people if they prefer a laptop or desktop but the real question is, what does it mean for your culture and work style.

    Based on what tools people are given they will find different ways to work. In the most basic example, give them laptops and they will work in groups but also from home more. Give them desktops and they will come in but perhaps not be flexible enough. This applies to quite a few hardware and software purchese. When you save $1000 dollars by giving the two sales guys slower machines are you saying they are not as important as the 20 developers? Perhaps you should just spend the extra $1000...or perhaps not.

    I only suggest you keep in mind that even decisions that seem totally IT or budget based can have wider implications.

    Someone at a management level should be thinking though these questions as part of this process.

  • the simplest rule to follow (Score:3, Insightful)

    by v1 ( 525388 ) on Monday August 08, 2005 @08:01PM (#13274817) Homepage Journal
    is often one of the easiest. The bean-counters, especially the computer-illiterate ones, look at the WidgetMaster 2000 and all they see is a price tag, because they have no idea what this magic device does, or how it is going to help the company make money. When all you have is a price tag to work with, all you can do is go cheap. ;)

    So, for any item you would like to have, (I didn't say "have to have") you need to put together a simple description of the item. Explain in plain terms what it does, this will help the people that have half a clue. Then spell out how this item will save money or make money, in simple terms. (go on the assumption that what you have just told them is ALL they know about the item at this point) Explain how long the item will last, and how long it will take to break even. Explain how much money you roughly estimate the item will make your company over its lifespan, factoring in its initial cost and the cost of updates, maintenance, etc. Don't cut corners on the future costs - they need to know if you have to buy a new license for the software every year or renew a service contract.

    Do this for anything you would like to have. Do not restrict yourself to things you think you will get, or just the things you find essential. Include it all. They are unlikely to approve everything, so there is no sense in being picky about what you ask for - you can't get what you didn't ask for. You might drop a hint to the reviewers when you hand it in, giving them a hint as to how much of this you expect to be approved. This will ease tensions as they may still not understand how much of this you need and how much you want. If you tell them you're hoping to get at least 50% of what's on the list, they won't freak out trying to figure out where they're going to get budget to get 95% of your list. (this usually leads to you getting a completely random assortment)

    Depending on who's evaluating the list, it may also be useful to break the items down into groups. "Essentials", things we need to get to stop hemoraging money. "Needs", things we need to become more proffitable, improve efficiency, improve customer response time, etc. "Try-outs", things we'd like to get into and we're looking for a sample of the technology to see if it's worth a buy-in. "Extras", things we strictly don't need, but that may have a positive effect on the company... these can include things that simply make employees' jobs easier to do or more tolerable. (how about a radio for the mailroom?) If they're short on cash they may very well go entirely on this grouping to determine what they get - maybe they only get the essentials and the needs this year.

    This does a lot for you. It stops them from buying stupid things you don't really need rather than the things you had to have yesterday. It also helps them to make informed decisions about what they should buy and what can wait until next year or next quarter. And it helps you because you can push the tech in the direction you are prepared to go rather than getting a spray of differnt items which could take your people in three different directions at once. You are their only source of information right now and what you tell them is very important to your business. You aren't actually the one spending the money, but they are depending on your professional opinion right now to spend that money where it counts. What you tell them will determine the direction your I.T. goes for the next 10 months.
  • As we all know, the biggest dent in budgets is made by personnel costs.

    Unless the information manager is only doing information management 2 or 3 hours a week, I would say it is useless for such a small company to have one on staff. If the company has such a strange spending pattern that spending on other things actually outweighs hiring an information manager, then you're not doing your job; and if you are doing your job, your job is redundant.

  • budget = how may seats of autocad... (Score:3, Insightful)

    by capsteve ( 4595 ) on Tuesday August 09, 2005 @03:58AM (#13276764) Homepage Journal
    i think the real question being posed to our friend is: for our small architectural firm, how many copies of autocad photoshop illustrator are we buying this year? what is the minimum software and hardware we need to purchase to keep our employees productive whitout breaking the bank? i was speaking with a guy from a small architectural firm last year during a focus group, and what i gleened from that conversation is how much architecture relies on presentation. marker renderings and topographical models have been replaced by 3d renderings and photoshop compositions from existing elevation photos...

    at the end of the day it's a head/seat count for hardware and software. i usually count on at least 1 major upgrade a year which i'll be asked to purchase at a cost of 30-70% of original cost, plus 1-2 major bug fixes, and 1-6 minor fixes at little to no charge, regardless of software. i also expect production hardware to be replaced(desktop computers, large format plotters, centralized workgroup laser printers, color copiers) every 3 years, and system hardware(servers, raid storage, network equipment, tape jukeboxes, server archive software, other server software) to be replaced every 5 years.

    of course YMMV in your particular scene, so don't ask your boss to replace a bunch of gear if he's a cheapskate. pose every need as exactly that, a need. we can't do our presentations WITHOUT photoshop CS2, we NEED to upgrade 10 copies of autocad to version 2006 our senior architect is complaining that his BOOTLEG copy of version 14 is taking a long time to launch, our HP5000 is breaking down and the cost or repair is MORE that a years worth of lease payments, if we don't buy X copies of Y software, one of our disgruntal former employees will drop a dime on us and call the SPA or BSA, so here's a schedule for how to get legit in the next 3 years... you get the picture... if you can't buy it this year, schedule it for next year, unless it's a break fix.

Slashdot Top Deals

He has not acquired a fortune; the fortune has acquired him. -- Bion

Close