IT Focus Area: strategy
February 2, 2017
How to Successfully Fund Your IT Projects
Profits. Budgets. Costs.
The international language of business is numbers.
However, some IT organizations consider the 1s and 0s before the dollars and cents.
Savvy IT leaders are starting to crunch the numbers on business finance and operational impact upfront.
Stakeholders, such as the CEO and CFO, need to see these numbers before they say, “yes” to your project. For example, will your IT services reduce or increase your costs? Will making your IT more agile allow you to better serve customers and therefore increase your revenue? Will upgrading your environment improve your time to market when you launch new services? How will your project impact your current risk profile?
To get an IT project funded, think about your financial model early in the game. In particular, show stakeholders how the project fits within a standard investment evaluation.
Why IT Needs a New Financial Model
Since IT and the business are so tightly linked, you should treat technology like any other investment. Understand what financial modeling techniques your company uses when considering new investment strategies.
Speak the language of business and be prepared to explain why legacy, fixed-budget models don’t work for new IT models based on consumption, usage and/or the cloud. For example, you can’t set a fixed budget for the next three to five years, as it’s impossible to know what you will need that far down the road. The IT space is changing so rapidly that setting a fixed budget will limit your ability to evolve with the times.
Instead, you need a flexible budget that aligns with an operational expenditure (OPEX)-based financial model. Rethinking your IT budget allows you to offer flexible consumption, so the business can quickly shift gears as market and customer demands change.
The Key to Getting Your IT Projects Funded
When you seek IT funding, you’ll likely run into people who say, “Things are fine the way they are” or, “We can hold off for a few more years.”
But the longer you keep things the same, the more you will fall behind your competitors.
To stay ahead in the game, you must show why business as usual is no longer an option.
A “business as usual” exercise spells out the costs and risks of doing nothing – in financial terms. It may include the following costs:
- Current depreciation and/or lease expenses
- Growth, refresh or upgrade expenses
- Maintenance and software support
- Professional services
- Environmental costs
- Internal resources
- Managed services
- Any other expected changes in your environment over your planning period
You can present the financial summary in whatever format your business uses to analyze investments. For example, does your leadership need to see cash-based or budget-based modeling? Is the project a one-time event or will you need to budget for annual costs?
Once you have quantified the financial risks of “business as usual”, you must then, show the impact of the proposed investment. How does the new investment compare with your business as usual costs? Can you quantify any incremental investments and/or savings to stakeholders? For example, how will a new IT service impact your total cost of ownership (TCO) over an appropriate period of time?
If the project won’t yield direct savings, you can make your case by showing the risks of business as usual. These risks may include security vulnerabilities that leave you open to hackers. Another risk is inflexibility, which can harm your customer experience and cause you to lose business to competitors that provide better service.
State Your Financial Business Case
Building a financial business case is key to getting funding for any IT investment.
But stakeholders will only listen to your case if you speak their language. This means dropping the “geek speak,” as executives aren’t interested in features and functions. Instead, they respond to the language of numbers.
The “business as usual” framework is a great jumping-off point, as it answers many of the questions that stakeholders will ask. When you show the financial, operational and business benefits, you’ll increase your chances of getting your IT projects funded.