IT Service Financial Management
The main objectives of preparing IT budgets are:
- Planning IT spending and long-term investments.
- Ensuring that IT services are adequately financed.
- Establishing clear objectives that allow the performance of the IT organisation to be evaluated.
The budgets prepared may have different time horizons. They may be short term, including the cost of services currently being provided, or have an outlook focusing on the envisaged development of the business over two or more years.
Although there is no one single way of preparing an IT budget, common methods include:
- Incremental budgeting: the budget is based on the history of past budgets, adapting it to changes in costs and the development of new technologies, and taking into account the appearance of new services.
- Budgeting "from scratch": based on the services currently being delivered and the expected growth over the budgeted period, the whole structure of costs and investments is considered starting from a clean slate.
In order for the budgets to be realistic and to serve as a reference for the IT organisation, it is necessary to first identify all the cost items.
Estimating the cost associated with these items is not always a simple task and external factors that are not under the direct control of the IT organisation often have an influence, such as an increase in the cost of software licences, etc.
It is essential that budgets take these uncertainties into account and care is taken to avoid their rendered obsolete by the slightest change in the market.