In my years of managing IT budgets for client's as well as my own company, I've learned a few key things: 

1.     The budget should be detailed.  Too often SMBs don’t get granular in their IT budget, usually because the person tasked with creating the budget doesn't understand how (a finance person who doesn't understand IT or an IT person that doesn't understand budgeting).  

• Capture all costs!  Maintenance agreements, Training, etc. 

2.     Budget for the unexpected. Let's face it, IT isn't perfect.  Look at historic trends to determine a reasonable amount for unplanned expenses.  

3.     Review previous year’s budgets to determine budget accuracy.  Senior management needs accurate budgets to make sound decisions.  You need to understand if you’re previous budgets were off and adjust accordingly.  You can even make this into a little game, what’s your % of error.  See if you’re more accurate than other departments.    

4.     Be realistic.  Senior management needs real numbers.  I’ve seen IT departments go to either extreme; projecting high so they have room for error or lack of proper planning and projecting low because they want to show that their department yields value.  The latter situation usually happens when a senior manager doesn’t understand IT and constantly focuses on just making it cheaper.  By simply complying, you’re not truly serving your organization. You have to advocate for an appropriate level of spending.    

5.     Understand the Strategic Vision.  The biggest mistake an IT department can make is to assume that next year will be the same as the last year.  Business changes rapidly, especially in this economy, and IT needs to change just as fast.  If you’re planning for next year’s budget you need to incorporate an appropriate amount to enable the organizations strategic goals.

6.     Get input from other departments.  IT only sees what IT sees.  There may be strategic discussions happening within other departments that have IT requirements.  You need to know what they are and plan accordingly. 

7.     Funnel Expense-reductions into an R&D account.  If you’re managing your expenses / budget well you’ll uncover savings.  Need a place to start, see Jody Gilbert’s recent post on 5 tips for controlling your budget (http://blogs.techrepublic.com.com/five-tips/?p=302&tag=nl.e106).  Funnel these savings into a special project or R&D fund.  Use these funds to exploring new ideas or ways to improve the business using IT, e.g. a cloud computing pilot, open source, etc. 

Hopefully you find these tips helpful.  If you other tips, please share! 

-        Aric Bandy

One example of how our services improve our client’s business is by managing their Point of Sale (POS) system.  Considering that this particular client is a retailer, it is of essential to be able to process sales transactions timely and accurately.  At the time we started working with our client, their POS system was around ten years old, and had outdated architecture.  We realized that the databases on each location were growing too large and failing.  Typically what would have happened in the past is that their IT staff would just keep fixing the problems in a reactive way, a short-term solution that does not address the root cause of the problems.  During times when transaction would fail, credit card transactions had to be written on a piece of paper and processed manually.  Once the transaction system recovered, the stores would call in to process the transaction, sometimes much later after the transaction had actually occurred.  This problem was compounded by the fact that 75 percent of the stores were having frequent outages.  Their POS was off once, twice, and sometimes even three times a month for up to a day, and sometimes even more than once a day.  When our team stepped in, we continued to perform the same patches and fixes, but we also started looking into a more long-term solution because these failures were not acceptable for the success of our clients business.  We sat down and looked at some low cost simple solutions that we could implement to help solve these problems. Within three weeks, we had solved nearly all of the transaction problems by revamping their data warehousing process.  There is still an occasional issue here and there which is to be expected in a complex environment, but outages decreased from 75 percent of stores once to three times a month to maybe one to two stores a quarter. It has drastically improved their operations and their ability to conduct business.