Budgeting Buzzwords

Summary-level budgeting: The prescription of IT budgets using minimum criteria, such as funding levels from the previous year. “This method lacks the clarity necessary to truly understand what everything costs and how IT costs align with the value to the business,” says Sean Worthington, CIO in residence at PlanView.

Chargebacks: A budget method that charges business units for their use of internal IT resources. “This method is often considered when the business units would like more direct accountability from IT,” says John Baschab, co-author of The Executive's Guide to Information Technology.

Benchmarking: The use of industry data and research — such as analyst reports and vendor pricing figures — to make sure annual budgeting figures are on track. “Using these techniques, companies can check the competitiveness of their IT cost structures by using the external benchmarks their competitors use, along with information from vendors to assess competitiveness,” explains Gartner analyst Howard Rubin.

Portfolio Management: A comprehensive view of all IT projects across an organization that includes budgeting and costing data. “This improves project/investment focus and tightens control over spend by forcing explicit statement of project benefits and better tracking of the delivery of benefits,” says Scott Holland, senior director and IT program manager at The Hackett Group.

Driver-based Planning: Harnessing the knowledge base of a particular business unit to better project IT costs for that division. “This is the best way to make sure that the business unit and IT plans and strategies are aligned with each other, so that everyone is rowing together,” suggests Robert Hull, chief financial officer at Adaptive Planning Inc., a budgeting forecasting application company in Mountain View, Calif.

See the main story, How IT is rethinking the traditional budgeting process.

Copyright © 2007 IDG Communications, Inc.

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