Budgeting time is upon us and that means it’s time to look ahead to the next year and beyond. Choices you make now can affect your bottom line for a long time to come. Perhaps you are considering an upgrade to some portion of your office information technology.
As with any major purchase, you want to spend wisely. You will need to decide what is critical to have, how upfront costs will offset ongoing costs, and how to make the case to decision makers that your recommendation is a worthy investment.
What’s Critical Now and Down the Road?
Look for technology that satisfies your critical needs while also giving you the option of scaling up and adding on in the future. Cloud-based software can save you money compared with an on-premise application. Learn the security and data accessibility implications of both options.
What’s a Reasonable Cost Range?
Talk with other businesses, trade associations, your advisory board and professionals you work with, such as your accountant, to determine cost. Your cost will be based largely on your industry and the number of employees in your company. Work with a provider who will set you up with only what you need… but with the possibility of expansion later.
What Should the Budget Include?
Here is where you might consider what portions of your technology falls under OpEx and what falls under CapEx. As more software moves to the cloud, some companies wrestle with how to classify these expenses. If you need to purchase a new server or a scanner, for example, you might consider these capital expenses. Items like these tend to depreciate in value.
That leaves you with what to include under operating expenses. Although some software may be purchased at an upfront cost, you typically pay for SaaS as you go. Consider, too, all the costs of implementation and maintenance, updates and unexpected problems. Which line item you place these under may affect the levels of approval you need to complete you budget.
Allow time to configure your new system and train employees. You may need to budget for a temporary period of lower productivity as everyone gets up to speed. And once a new software system is up and running, annual costs for maintenance, support and updates are typically around 20% of the original price. It’s a good idea include a buffer of 5 to 10% of your total budget for unforeseen expenses.
Making Your Case for the Cost
More and more, IT departments have to internally justify their budgets and plans to expand into new technology. Finance managers and CEOs may be unwilling to approve expenses for which they don’t see the value.
Make the case for how the proposed expense will impact the bottom line. Consider, for example, making an argument for a hosted VoIP solution. You finance person may not understand the differences between a hosted VoIP solution and regular telephone service. Perhaps you’re trying to make it easier for customers and prospects to connect with busy salespeople and workers who are often on the road. The ability to forward office lines to your team’s mobile devices will significantly improve the customer experience and deal closure. An effective budget request for this service would focus on three things:
- Quantifying the problem that you’re trying to solve
- Exploring the technology as both tech and a solution
- Focusing on the numbers
When you show how VoIP can correct an inefficiency that is costing the company business, the finance team is apt to be receptive. Lay out the costs--both up front and ongoing--and how the tech service or equipment is going to directly and indirectly impact the bottom line.
Planning Ahead
One last consideration is timing. Don’t wait until the last minute to update your software. If you switch to a completely new platform, you may need to build in transition time while you’re paying for both the old and the new. Also, remember that your competition may have already adopted the latest software and could impinge on your clientele.
Carefully considering what you need and when you need it, developing a realistic budget for total costs, and building a clear business case for your purchases can take much of the urgency and stress out of keeping your technology up-to-date. Follow these guidelines to make upgrade purchases a low-drama part of IT.