Top 3 CIO/CFO considerations while planning for the FY21 IT Budget in the ‘New Normal’​

Executive Summary:

This year’s budget season is quite different from any other.

Enterprises will experience acute supply vs demand pressures, have to plan for a somewhat uncertain FY21 and deal with the challenges of effective cost control driven by remote working.

To overcomes these challenges, enterprises will have to adopt robust and accurate IT Financial metrics to underpin investment, develop a capability to rapidly model multiple future scenarios, and bring together isolated datasets to ensure deeper insights and thereby improve control of the IT cost base.

Key challenges:

Aside from the operational practice of remote working, the IT budgeting planning for 2021 faces 3 key challenges:

  1. Acute supply vs demand pressures: The cost pressures on IT to do more with less is nothing new – as most CIOs have experienced this each year during the planning cycle. However, due to the wider macro-economic uncertainties, there will be continued cost pressures on all departments in FY21 and IT is no exception. Simultaneously, there will be ongoing demands for IT budgets driven by digital acceleration, remote work and additional IT security initiatives.
  2. Planning for an uncertain FY21: FY20 was not a ‘typical year’, and with ongoing uncertainty on the timing of a vaccine launch, its potential effectiveness, eventual distribution and likely adoption – all unknown, FY21 promises to be equally ‘atypical’. So, planning for multiple scenarios is essential to ensure the enterprise can respond immediately to a range of macro-economic and competitive pressures.
  3. Ineffective cost control: Enterprises will realise that the traditional way of monitoring budgets vs actuals at the cost-centre level is going to be quite limited in offering controls to the IT (& Finance) Department. Staff costs are usually around 40-50% of the IT budget and with a majority of IT staff continuing to work from home, rudimentary timesheets are used to monitor controls. With most companies not capturing sufficient detail within timesheeting systems and the ongoing practice of not linking timesheets systems to other datasets to going to accentuate opacity of cost and productivity measures.

Recommendations to overcome these challenges

  1. Use accurate IT Financial metrics with up-to-date data to underpin your Investment cases. Needless to say, strong alignment to the Business & IT strategy will be essential to prioritising FY21 initiatives. An additional level of scrutiny to project costs and incremental operating costs will be essential to weed out initiatives that don’t stack up.
  2. Enterprises need the ability to respond quickly to market events. Being able to rapidly re-forecast and scenario model various options is going to be a crucial capability to help prepare them for an eventual response. This capability needs to go beyond the traditional cost-centre metrics so senior leadership can understand the true impact of its decisions from different perspectives, specifically, the impact on its infrastructure and application portfolio, internal and external product offerings and internal business units.
  3. Leverage linked datasets to improve cost control and generate insights beyond the limits of any isolated system. By bringing together the data from your timesheet tool, financial system, IT infrastructure & application data, and procurement data – all enriched with industry-standard 3rd party datasets and aligned to industry-standard IT Cost Models, increases the transparency and thereby controls of your IT cost base.

All the best with your FY21 Budget planning. With better data and informed decision making, I believe we can all face up to whatever challenges FY21 throws at us.